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IMPORTANT

If you are in any doubt about any of the contents of this prospectus, you should seek independent professional advice.

眾安在綫財產保險股份有限公司
ZHONGAN ONLINE P & C INSURANCE CO., LTD. *
(A joint stock limited company incorporated in the People’s Republic of China with limited liability
and carrying on business in Hong Kong as “ZA Online Fintech P & C”)

GLOBAL OFFERING
Number of Offer Shares under the : 199,293,900 H Shares (subject to the
Global Offering Over-allotment Option)
Number of Hong Kong Offer Shares : 9,964,800 H Shares (subject to adjustment)
Number of International Offer Shares : 189,329,100 H Shares (subject to adjustment
and the Over-allotment Option)
Maximum Offer Price : HK$59.70 per Offer Share plus brokerage of
1.0%, SFC transaction levy of 0.0027% and
Hong Kong Stock Exchange trading fee of
0.005% (payable in full on application in Hong
Kong dollars and subject to refund)
Nominal Value : RMB1.00 per H Share
Stock Code : 6060
Joint Sponsors, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers

Joint Bookrunners and Joint Lead Managers

Joint Lead Managers

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus,
make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents
of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in “Appendix VII — Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection”, has
been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong).
The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above.
The Offer Price is expected to be determined by agreement between the Joint Global Coordinators (on behalf of the Underwriters) and the Company on the Price Determination Date, which is expected
to be on or about Thursday, September 21, 2017 and, in any event, not later than Friday, September 22, 2017. The Offer Price will not be more than HK$59.70 per Offer Share and is expected to be not
less than HK$53.70 per Offer Share, unless otherwise announced.
If, for any reason, the Offer Price is not agreed by Friday, September 22, 2017 between the Joint Global Coordinators (for themselves and on behalf of the Joint Bookrunners and the Underwriters) and
us, the Global Offering will not proceed and will lapse.
The Joint Global Coordinators (for themselves and on behalf of the Joint Bookrunners and the Underwriters) may, where considered appropriate and with our consent, reduce the number of Hong Kong
Offer Shares and/or the indicative Offer Price range below that stated in this prospectus (which is HK$53.70 to HK$59.70) at any time prior to the morning of the last day for lodging applications under
the Hong Kong Public Offering. In such a case, notices of the reduction in the number of Hong Kong Offer Shares and/or the indicative Offer Price range will be published in the South China Morning
Post (in English) and the Hong Kong Economic Times (in Chinese) as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the day which
is the last day for lodging applications under the Hong Kong Public Offering. Such notices will also be available on the website of the Stock Exchange at www.hkexnews.hk and on the website of our
company at https://www.zhongan.com. Further details are set forth in the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus. If
applications for Hong Kong Offer Shares have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offering, in the event that the number of Offer
Shares and/or the indicative Offer Price range is so reduced, such applications can subsequently be withdrawn.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offered, sold, pledged or transferred within the
United States, except that Offer Shares may be offered, sold or delivered (a) in the United States to QIBs in reliance on an exemption from registration under the U.S. Securities Act provided by, and
in accordance with the restrictions of, Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act or (b) outside the United States
in offshore transactions in accordance with Regulation S.
The Company is incorporated, and substantially all of its businesses are located, in the PRC. Potential investors should be aware of the differences in the legal, economic and financial systems between
the PRC and Hong Kong and that there are different risk factors relating to investment in PRC-incorporated businesses. Potential investors should also be aware that the regulatory framework in the PRC
is different from the regulatory framework in Hong Kong and should take into consideration the different market nature of the shares of the Company. Such differences and risk factors are set out in
“Risk Factors”, “Appendix IV — Summary of Principal Legal and Regulatory Provisions” and “Appendix V — Summary of Articles of Association”.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, including the risk factors set out in “Risk Factors”. The obligations
of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Joint Global Coordinators (on behalf of the Underwriters) if certain grounds arise prior
to 8:00 a.m. on the Listing Date. Such grounds are set out in “Underwriting”.

* For identification purposes only and carrying on business in Hong Kong as “ZA Online Fintech P & C”

September 18, 2017


EXPECTED TIMETABLE (1)

Latest time to complete electronic applications


under HK eIPO White Form service through the
designated website www.hkeipo.hk (2) . . . . . . . . . . . 11:30 a.m. on Thursday, September 21, 2017

Application lists open (3) . . . . . . . . . . . . . . . . . . . . . . . 11:45 a.m. on Thursday, September 21, 2017

Latest time to lodge WHITE


and YELLOW Application Forms . . . . . . . . . . . . . 12:00 noon on Thursday, September 21, 2017

Latest time to give electronic application instructions


to HKSCC (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Thursday, September 21, 2017

Latest time to complete payment of HK eIPO White Form


applications by effecting internet banking transfer(s)
or PPS payment transfer(s) . . . . . . . . . . . . . . . . . . 12:00 noon on Thursday, September 21, 2017

Application lists close . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Thursday, September 21, 2017

Expected Price Determination Date (5) . . . . . . . . . . . . . . . . . . . . . . . Thursday, September 21, 2017

Announcement of:

• the Offer Price;

• the level of application in the Hong Kong Public Offering;

• the level of indications of interest in the International Offering; and

• the basis of allocation of the Hong Kong Offer Shares under the Hong Kong Public Offering

To be published (a) in South China Morning Post (in English)


and Hong Kong Economic Times (in Chinese);
(b) on our website at https://www.zhongan.com (6) and
the website of the Hong Kong Exchanges and Clearing Limited
at www.hkexnews.hk (7) on or before . . . . . . . . . . . . . . . . . . . . . Wednesday, September 27, 2017

Results of allocations in the Hong Kong Public Offering


(with successful applicants’ identification document
numbers, where appropriate) to be available through a
variety of channels (see “How to Apply for Hong Kong
Offer Shares — 11. Publication of Results”) from . . . . . . . . . . . Wednesday, September 27, 2017

Result of allocations in the Hong Kong Public Offering


(with successful applicants’ identification document numbers,
where appropriate) will be available at www.tricor.com.hk/ipo/result
with a “search by ID” from . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, September 27, 2017

— i —
EXPECTED TIMETABLE (1)

H Share certificates in respect of wholly or partially


successful applications to be dispatched or deposited into
CCASS on or before (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, September 27, 2017

HK eIPO White Form e-Auto Refund payment instructions/refund


cheques in respect of wholly or partially unsuccessful
applications to be dispatched on or before (8)(9)(10) . . . . . . . . . . . Wednesday, September 27, 2017

Dealings in H Shares on the Hong Kong Stock Exchange


expected to commence at 9:00 a.m. on . . . . . . . . . . . . . . . . . . . . . Thursday, September 28, 2017

Notes:
(1) All times and dates refer to Hong Kong local time, except as otherwise stated. Details of the structure of the Global
Offering, including conditions of the Hong Kong Public Offering, are set forth in section headed “Structure of the Global
Offering” in this prospectus.
(2) If you have already submitted your application through the designated website at www.hkeipo.hk and obtained a
payment reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the
application process (by completing payment of application monies) until 12:00 noon on the last day for submitting
applications, when the application lists close. You will not be permitted to submit your application through the designated
website at www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications.
(3) If there is a tropical cyclone warning signal number 8 or above, or a “black” rainstorm warning in force in Hong Kong
at any time between 9:00 a.m. and 12:00 noon on Thursday, September 21, 2017, the application lists will not open on
that day. Please see “How to Apply for Hong Kong Offer Shares — 10. Effect of Bad Weather on the Opening of the
Application Lists” in this prospectus.
(4) Applicants who apply for the Hong Kong Offer Shares by giving electronic application instructions to HKSCC should
refer to section headed “How to Apply for Hong Kong Offer Shares — 6. Applying by Giving Electronic Application
Instructions to HKSCC via CCASS” in this prospectus.
(5) The Price Determination Date is expected to be on or about Thursday, September 21, 2017 and, in any event, not later
than Friday, September 22, 2017. If, for any reason, the Offer Price is not agreed by Friday, September 22, 2017 between
the Joint Global Coordinators (for themselves and on behalf of the Joint Bookrunners and the Underwriters) and our
Company, the Global Offering will not proceed and will lapse.
(6) None of the website or any of the information contained on the website forms part of this prospectus.
(7) The announcement will be available for viewing on the Hong Kong Stock Exchange’s website at www.hkexnews.hk.
(8) Applicants who apply for 1,000,000 or more Hong Kong Offer Shares and have provided all information required by your
Application Forms, you may collect refund cheques (where applicable) and H Share certificates (where applicable) in
person from our H Share Registrar, Tricor Investor Services Limited, Level 22, Hopewell Centre, 183 Queen’s Road East,
Hong Kong from 9:00 a.m. to 1:00 p.m. on Wednesday, September 27, 2017. Applicants being individuals who opt for
personal collection must not authorize any other person to make collection on their behalf. Applicants being corporations
who opt for personal collection must attend by their authorized representatives each bearing a letter of authorization from
his corporation stamped with the corporation’s chop. Both individuals and authorized representatives (if applicable) must
produce, at the time of collection, evidence of identity acceptable to the H Share Registrar. Uncollected refund cheques
and H Share certificates will be dispatched promptly by ordinary post to the addresses as specified in the applicants’
Application Forms at the applicants’ own risk. Details of the arrangements are set out in section headed “How to Apply
for Hong Kong Offer Shares” in this prospectus.
(9) Applicants who apply through the HK eIPO White Form service and paid their applications monies through single bank
accounts may have refund monies (if any) dispatched to their application payment bank account, in the form of e-Auto
Refund payment instructions. Applicants who apply through the HK eIPO White Form service and paid their application
monies through multiple bank accounts may have refund monies (if any) dispatched to the address as specified in their
application instructions to the HK eIPO White Form Service Provider, in the form of refund cheques, at their own risk.
(10) Refund cheques will be issued in respect of wholly or partially unsuccessful applications, and also in respect of
successful applications if the Offer Price is less than the price payable on application.

— ii —
EXPECTED TIMETABLE (1)

The H Share certificates will only become valid certificates of title provided that the Global
Offering has become unconditional in all respects and neither of the Hong Kong Underwriting
Agreement nor the International Underwriting Agreement is terminated in accordance with its
respective terms prior to 8:00 a.m. on the Listing Date. The Listing Date is expected to be on or
about Thursday, September 28, 2017. Investors who trade the H Shares on the basis of publicly
available allocation details prior to the receipt of H Share certificates or prior to the H Share
certificates becoming valid certificates of title do so entirely at their own risk.

— iii —
CONTENTS

IMPORTANT NOTICE TO INVESTORS


We have issued this prospectus solely in connection with the Hong Kong Public Offering and
the Hong Kong Offer Shares, and it does not constitute an offer to sell or a solicitation of an offer
to buy any security other than the Hong Kong Offer Shares offered by this prospectus pursuant to
the Hong Kong Public Offering. This prospectus may not be used for the purpose of, and does not
constitute, an offer or invitation in any other jurisdiction or in any other circumstances. We have
taken no action to permit a public offering of the Offer Shares in any jurisdiction other than Hong
Kong, and we have taken no action to permit the distribution of this prospectus in any jurisdiction
other than Hong Kong. The distribution of this prospectus and the offering and sale of the Offer
Shares in other jurisdictions are subject to restrictions and may not be made except as permitted
under the applicable securities laws of such jurisdictions pursuant to registration with or
authorisation by the relevant securities regulatory authorities or an exemption therefrom.

You should rely on the information contained in this prospectus and the Application Forms to
make your investment decision. We have not authorised anyone to provide you with information that
is different from what is contained in this prospectus. Any information or representation not made
in this prospectus must not be relied on by you as having been authorised by us, the Joint Sponsors
or any Relevant Persons. Information contained on the website at https://www.zhongan.com/ does
not form part of this prospectus.

Page

Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Information about this Prospectus and the Global Offering . . . . . . . . . . . . . . . . . . . . . . . 91

Directors, Supervisors and Parties Involved in the Global Offering . . . . . . . . . . . . . . . . 96

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

History and Corporate Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

— iv —
CONTENTS

Directors, Supervisors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314

Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334

Our Cornerstone Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338

Relationships with Connected Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340

Waivers from Strict Compliance with the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 366

Future Plans and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370

Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371

Structure of the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380

How to Apply for Hong Kong Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388

Appendix I — Accountant’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Appendix II — Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . II-1

Appendix III — Taxation and Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

Appendix IV — Summary of Principal Legal and Regulatory Provisions . . . . . . . . . . IV-1

Appendix V — Summary of Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1

Appendix VI — Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1

Appendix VII — Documents Delivered to the Registrar of Companies in Hong Kong


and Available for Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VII-1

— v —
SUMMARY

This summary aims to give you an overview of the information contained in this prospectus.
As this is a summary, it does not contain all the information that may be important to you. You
should read the entire document before you decide to invest in the Offer Shares.

There are risks associated with any investment. Some of the particular risks in investing in the
Offer Shares are set out in the section headed “Risk Factors” in this prospectus. You should read
that section carefully before you decide to invest in the Offer Shares.

OVERVIEW

Our Mission
Our mission is to redefine insurance through connecting ecosystems and applying cutting-edge
technologies.

Our Company
We are an online-only Insuretech company in China. Leveraging our technologies, we develop
ecosystem-oriented insurance products and solutions in different consumption scenarios to better
serve our customers. From our inception in October 2013 to December 31, 2016, we sold over 7.2
billion insurance policies and served approximately 492 million policyholders and the insured,
ranking us the largest insurer in China by these measures during this period according to the Oliver
Wyman Report. In addition, we are the largest online insurance company in China with GWP of
RMB3,408.0 million in 2016. We experienced significant growth during the Track Record Period. Our
GWP increased significantly from RMB794.1 million in 2014 to RMB2,283.0 million in 2015, and
further to RMB3,408.0 million in 2016, and from RMB604.4 million for the three months ended March
31, 2016 to RMB1,030.4 million for the three months ended March 31, 2017. Our net premiums earned
increased significantly from RMB712.2 million in 2014 to RMB1,921.5 million in 2015, and further
to RMB3,225.4 million in 2016, and from RMB569.2 million for the three months ended March 31,
2016 to RMB886.8 million for the three months ended March 31, 2017.
We believe our proprietary infrastructure and technologies are critical to our success. We operate
our core insurance system on our proprietary cloud-based platform called Wujieshan. We have also
developed advanced artificial intelligence capabilities to optimize product features quickly to enhance
customer experience and strengthen risk management. We have accumulated extensive user data
originating from our large and expanding customer base and third-party data providers. The
application of our big data analytics throughout the insurance value chain enhances our results of
operations.
We have adopted a set of effective policies and procedures that is consistent with industry best
practice to evaluate and manage risks. We have an experienced team comprised of risk, legal and
compliance professionals to oversee our risk management efforts. In addition, our data-driven risk
management system enables dynamic pricing and risk tracking, which enables us to optimize our
product features based on our risk control capabilities.

Net Underwriting Loss in the Track Record Period

In 2014, 2015 and 2016, our net profit was RMB37.0 million, RMB44.3 million and RMB9.4
million, respectively. In the same periods, however, we recorded an underwriting loss of RMB61.5
million, RMB511.6 million and RMB153.1 million, respectively, and our combined ratio was 108.6%,
126.6% and 104.7%, respectively.

Our underwriting loss during the Track Record Period was primarily due to the fact that we are
in an early stage of development and have mainly focused on expanding our operations at scale by
connecting with more ecosystem partners and launching more products to cover more customers to
drive long-term growth. As we continue to expand into and penetrate each of the ecosystems, we
expect our GWP to increase significantly in 2017. However, such rapid expansion of our business
scale entails substantial expenses. Consulting fees and service charges, which are primarily fees paid
to our ecosystem partners in connection with sales of our policies through their platforms, increased
from 13.3% in 2014 to 30.7% in 2015 and further to 33.9% in 2016 as a percentage of our net
premiums earned. Handling charges and commissions, which are fees paid to insurance agents for the

— 1 —
SUMMARY

distribution of our policies, increased from 2.3% in 2014 to 5.2% in 2015 and further to 8.9% in 2016
as a percentage of our net premiums earned. We also made substantial research and development
investments, which increased from 2.8% in 2014 and 2015 to 6.3% in 2016 as a percentage of our
GWP.

Our net profit from 2014 to 2016 was mainly driven by our net investment income, which
increased from RMB80.1 million in 2014 to RMB520.7 million in 2015 and then decreased to
RMB98.6 million in 2016. Our net investment income has fluctuated and will continue to fluctuate
subject to the performance of the PRC securities market.

Net loss in 2017


We incurred a net loss of RMB202.1 million in the three months ended March 31, 2017 and are
expected to incur a significant net loss in 2017, primarily due to (i) the significant increase in
unearned premium reserves due to the change in product mix which includes more products with
longer terms, such as our health and consumer finance insurance products, (ii) the significant increase
in operating and administrative expenses due to the increased headcount and investment in research
and development in order to support the rapid growth of the Company, and (iii) the significant increase
in handling charges and commissions, and consulting fees and service charges due to significant
growth of our GWP generated from the sales on the platforms of our ecosystem partners. We plan to
continue to focus on products in the health and consumer finance ecosystems as we believe that they
have significant growth potentials. In addition, during the Track Record Period, net written premiums
less (i) insurance claims paid less claims paid ceded to reinsurers, (ii) handling charges and
commissions net of revenues expense recovered and (iii) technical service fees, as a percentage of net
written premiums, were relatively higher for the health and consumer finance ecosystems among our
ecosystems. In 2016 and the three months ended March 31, 2017, the total handling charges and
commissions and technical service fees that we paid to our top five ecosystem partner groups (in terms
of GWP contribution) amounted to RMB966.0 million and RMB251.1 million, respectively.
Our future results of operations will be affected by, among others, our ability to maintain and
develop relationships with our ecosystem partners, to further expand our customer base, and to control
our claims incurred and operating expenses. As we continue to experience growth, establish
partnership with more ecosystem partners and record increased GWP, we aim to gradually lower our
combined ratio through a combination of the following efforts and initiatives: (i) further leveraging
on accumulated user data to improve our risk management and pricing and stabilize loss ratio, (ii)
leveraging on economies of scale to control staff cost, and other operating and administrative
expenses, (iii) change of product mix, and (iv) increasing sales on our proprietary platforms and
cooperation with smaller, more specialized or offline ecosystem partners. In the medium to long term,
we aim to lower our combined ratio to under 100% and realize an underwriting profit. For further
details, see the section headed “Risk Factors — Risks Relating to Our Business — We incurred a net
underwriting loss throughout the Track Record Period and a net loss in the first quarter of 2017. We
expect to incur a significant loss in 2017, and we may continue to experience losses in the future.”
in this prospectus.

Our Innovative Business Model


We design and offer ecosystem-oriented insurance products and solutions in different
consumption scenarios. We embed our products into our ecosystem partners’ platforms. Therefore, our
customers are able to purchase our insurance products and solutions seamlessly through consumption
scenarios in their daily lives.
Our valuable customer data is primarily originated from the cooperation with our ecosystem
partners when we offer our insurance products and solutions to serve our customers. Based on the
in-depth and comprehensive understanding of our customers’ behaviors, we develop innovative
products and solutions, offer dynamic pricing, automated claims settlement and ensure effective risk
management. Our advanced technologies and core competencies power our innovative business model
and distinguish us from our competitors.
Within each ecosystem that we tap into, we first cooperate with the leading ecosystem partners.
After we establish a mature cooperation with the leading ecosystem partners, we build on the
successful experience and extend our cooperation with other ecosystem partners, including those
smaller, more specialized or offline players. In addition, we sell certain insurance products through
insurance agents and our proprietary platforms.

— 2 —
SUMMARY

Our Ecosystems, Products and Solutions


We offer extensive property and casualty insurance products, covering accident insurance, bond
insurance, health insurance, liability insurance, credit insurance, cargo insurance, household property
insurance and other insurance types. The following table sets forth a breakdown of our GWP by
insurance types recognized by the CIRC for the periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,
2014 2015 2016 2016 2017
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
(unaudited)

Accident insurance . 44,391 5.6 282,783 12.4 982,228 28.8 182,519 30.2 311,682 30.3
Bond insurance . . . 108,929 13.7 453,290 19.8 517,613 15.2 108,808 18.0 84,208 8.2
Health insurance . . . 13 0.0 13,384 0.6 205,014 6.0 10,912 1.8 154,881 15.0
Liability insurance . 15,993 2.0 81,209 3.5 185,097 5.5 35,082 5.8 82,582 8.0
Credit insurance . . . 4,003 0.5 51,728 2.3 102,826 3.0 24,904 4.1 46,762 4.5
Cargo insurance . . . — — 15,682 0.7 59,304 1.7 5,322 0.9 18,343 1.8
Household property
insurance . . . . . 4,555 0.6 33,762 1.5 15,464 0.5 1,732 0.3 10,448 1.0
Others (1) . . . . . . . . 616,213 77.6 1,351,204 59.2 1,340,502 39.3 235,122 38.9 321,457 31.2
Of which:
Shipping return
insurance (2) . . 613,145 77.2 1,298,219 56.9 1,193,562 35.0 206,092 34.1 257,814 25.0
Total . . . . . . . . . . 794,097 100.0 2,283,042 100.0 3,408,048 100.0 604,401 100.0 1,030,363 100.0
Note:
(1) The CIRC recognizes the following types of the property and casualty insurance products: accident insurance, bond
insurance, health insurance, liability insurance, credit insurance, cargo insurance, household property insurance and
others. Although shipping return insurance accounted for a significant percentage of our GWP during the Track Record
Period, it is categorized as “others” based on its policy terms in our periodic reports to the CIRC.
(2) GWP from shipping return insurance decreased by 8.1% from RMB1,298.2 million in 2015 to RMB1,193.6 million in
2016, as we increased our focus on other product types with greater growth potentials. In addition, we faced increased
competition in 2016 as there were new market entrants providing shipping return insurance on the platforms of our major
e-commerce ecosystem partners, such as Taobao Marketplace.

Currently, our products and solutions are primarily offered in the context of five major
ecosystems, namely lifestyle consumption, consumer finance, health, auto and travel ecosystems.
The following table sets forth our product types with product examples and the corresponding
ecosystem that they mainly serve:

Insurance type Product example(s) Main ecosystem(s) served


Accident insurance . . . . Flight Accident and Delay Policy Travel
(“航意航延險”)
Train Accident Policy (“火車意外險”)
Bond insurance . . . . . . Zhong Le Bao (“眾樂寶”) Lifestyle consumption
Can Ju Xian (“參聚險”) and consumer finance
Health insurance . . . . . Personal Clinic Policy (“尊享e生”) Health
Group Health Insurance Plan (“健康團險計劃”)
Liability insurance . . . . Phone Accident Policy (“手機意外險”) Lifestyle consumption
Logistics Liability Insurance (“物流責任險”)
Credit insurance . . . . . . Mashanghua (“馬上花”) Consumer finance
Cargo insurance . . . . . . Taobao Free Return Policy (“放心淘”) Lifestyle consumption
Household property General Screen Crack Policy (“碎屏險”) Lifestyle consumption
insurance . . . . . . . . . Account Safety Policy (“ 帳戶安全險 ”) and consumer finance
Others . . . . . . . . . . . . . Shipping Return Policy (“退貨運費險”) Lifestyle consumption
Generic Buyer Version of Shipping Return
Policy (“任性退”)

— 3 —
SUMMARY

The following table sets forth a breakdown of our GWP by each ecosystem for the periods
indicated:

For the Three Months Ended


For the Year Ended December 31, March 31,
Breakdown by
ecosystems 2014 2015 2016 2016 2017
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
(unaudited)

Lifestyle
consumption. . . . 732,299 92.2 1,596,203 69.9 1,620,363 47.6 285,210 47.2 346,458 33.7
Consumer finance . . 9,275 1.2 303,221 13.3 318,079 9.3 73,300 12.1 93,773 9.1
Health . . . . . . . . . 11 0.0 19,225 0.9 235,927 6.9 16,316 2.7 190,059 18.4
Auto . . . . . . . . . . — — 511 0.0 3,724 0.1 118 0.0 1,495 0.1
Travel . . . . . . . . . 44,271 5.6 322,099 14.1 1,081,643 31.7 204,203 33.8 331,825 32.2
Others . . . . . . . . . 8,241 1.0 41,783 1.8 148,312 4.4 25,253 4.2 66,754 6.5
Total . . . . . . . . . . 794,097 100.0 2,283,042 100.0 3,408,048 100.0 604,401 100.0 1,030,363 100.0

The following table sets forth a breakdown of (i) GWP, (ii) net written premiums, defined as
gross written premium less premium ceded to reinsurers, (iii) insurance claims paid less claims paid
ceded to reinsurers, (iv) handling charges and commissions net of reinsurance expense recovered, and
(v) technical service fees, which we paid to certain ecosystem partners under the cooperation
agreements, in absolute amounts and as percentages of our net written premiums from or by each
ecosystem for the periods indicated:

For the Year Ended For the three Months Ended


December 31, March 31,
Ecosystems 2014 2015 2016 2016 2017
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
(unaudited)

Lifestyle
consumption
GWP . . . . . . . . . . 732,299 1,596,203 1,620,363 285,210 346,458
Net written
premiums . . . . . 727,811 100.0 1,591,907 100.0 1,620,363 100.0 285,210 100.0 346,458 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . 488,244 67.1 1,090,311 68.5 1,073,197 66.2 191,925 67.3 209,794 60.6
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . (1,117) (0.2) (864) (0.1) 282 0.0 8 0.0 2,705 0.8
Technical service
fees . . . . . . . . . 66,964 9.2 278,284 17.5 280,706 17.3 55,855 19.6 89,603 25.9

Consumer finance
GWP . . . . . . . . . . 9,275 303,221 318,079 73,300 93,773
Net written
premiums . . . . . 9,275 100.0 303,221 100.0 318,079 100.0 73,300 100.0 93,773 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . 1,285 13.9 43,617 14.4 44,962 14.1 18,231 24.9 56,255 60.0

— 4 —
SUMMARY

For the Year Ended For the three Months Ended


December 31, March 31,
Ecosystems 2014 2015 2016 2016 2017
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
(unaudited)
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . 41 0.4 165 0.1 130 0.0 15 0.0 4 0.0
Technical service
fees . . . . . . . . . — — 99,559 32.8 65,861 20.7 12,613 17.2 19,656 21.0

Health
GWP . . . . . . . . . . 11 19,225 235,927 16,316 190,059
Net written
premiums . . . . . 11 100.0 16,964 100.0 203,456 100.0 13,840 100.0 156,930 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . — — 2,410 14.2 41,646 20.5 2,877 20.8 27,248 17.4
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . — — 1,053 6.2 13,793 6.8 1,106 8.0 27,680 17.6
Technical service
fees . . . . . . . . . — — — — 26,777 13.2 2 0.0 3,680 2.3
Auto
GWP . . . . . . . . . . — 511 3,724 118 1,495
Net written
premiums . . . . . — — 511 100.0 3,724 100.0 118 100.0 1,495 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . — — 61 11.9 621 16.7 10 8.5 597 39.9
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . — — — — 75 2.0 — — 59 3.9
Technical service
fees . . . . . . . . . — — — — 4,609 123.8 22 18.6 1,710 114.4

Travel
GWP . . . . . . . . . . 44,271 322,099 1,081,643 204,203 331,825
Net written
premiums . . . . . 43,948 100.0 319,203 100.0 1,076,793 100.0 203,287 100.0 330,075 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . 143 0.3 36,369 11.4 151,011 14.0 30,135 14.8 43,184 13.1
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . 17,720 40.3 91,256 28.6 240,241 22.3 38,184 18.8 66,656 20.2
Technical service
fees . . . . . . . . . 25,200 57.3 190,008 59.5 633,466 58.8 120,036 59.0 197,782 59.9

— 5 —
SUMMARY

Lifestyle consumption ecosystem


We provide insurance products to cover risks associated with product quality, logistics and
security of transactions in collaboration with e-commerce platforms in China, such as Taobao
Marketplace and Weidian. We also partner with leading consumer electronics manufacturers, such as
Xiaomi, to provide insurance for accidental damage and repair services for consumer electronic
products such as cell phones and other smart devices.
Our key products in the lifestyle consumption ecosystem include: Shipping Return Policy
(“退貨運費險”), Generic Buyer Version of Shipping Return Policy (“任性退”), Merchant Performance
Bond Insurance (“商家保證金保險”), Phone Accident Policy (“手機意外險”) and Phone Screen Crack
Policy (“手機碎屏險”).

Consumer finance ecosystem


We offer insurance products and solutions, which protect funding providers against default and
facilitate consumer borrowing and consumption on internet finance platforms, including Zhaocaibao
and Xiaoying. We also serve the consumer financing needs arising from other platforms, including
China Telecom and Mogujie.
Our key products and solutions in the consumer finance ecosystem mainly include: Mashanghua
(“馬上花”), our credit guarantee solutions for Orange Baitiao (“甜橙白條”), a consumer finance
service provided by China Telecom, and Baobei Open Platform (“保貝計劃”).

Health ecosystem
We offer insurance products and solutions covering risks of incurring medical and healthcare
expenses. We also provide value-added services to encourage individuals’ health-consciousness. We
offer individual health insurance products and group health insurance plans. We partner with hospitals,
research institutions, medical device manufacturers such as Omron, online healthcare platforms such
as We Doctor, online healthcare forums, pharmaceutical companies and distributors.
Our key products in the health ecosystem include: Personal Clinic Policy (“尊享e生”), Walk to
Wellness Policy (“步步保”), Diabetes Policy (“糖小貝”), as well as our Group Health Insurance Plan
(“健康團險計劃”).

Auto ecosystem
We offer insurance products to protect our customers against vehicle damage, personal injury and
death, vehicle theft and robbery. Since 2015, we jointly launched Baobiao Auto Insurance
(“保驫車險”) with Ping An Insurance, our shareholder and an insurance company in China. As of the
Latest Practicable Date, we have obtained licenses to underwrite auto insurance in 18 regions in
China, which cover the majority of the auto insurance market in China, as compared to six regions as
of December 31, 2016.
Our key product in the auto ecosystem is Baobiao Auto Insurance.

Travel ecosystem
We offer insurance products and solutions covering various risks arising from travel, such as
accidents, travel delay and travel cancellation. Since 2015, we have partnered with Ctrip to offer our
Flight Delay Policy. We have since expanded to partner with other major online travel agencies,
airlines and offline travel agencies.
Our key product in the travel ecosystem is Flight Accident and Delay Policy (“航意航延險”).

Our Sales Channels


We embed our products and solutions into the platforms of our ecosystem partners to address the
customers’ needs for protection. We have established partnerships with leading companies in China’s
internet economy, such as Alibaba, Mogujie, Ctrip, Didi Chuxing, Xiaomi, Ant Financial, Bestpay,
amongst others and have established partnerships with 199 ecosystem partners as of March 31, 2017.

— 6 —
SUMMARY

We rely on our ecosystem partners and other participants in different ecosystems in China to
offer innovative insurance products to customers in different consumption scenarios. In each of our
ecosystem, and for each of our key product category, we rely on a few ecosystem partners to generate
a significant portion of our GWP. In 2014, 2015, 2016 and the first quarter of 2017, GWP generated
from or through the sale on the platforms of our ecosystem partner groups, which aggregate ecosystem
partners and their subsidiaries, accounted for 100.0%, 97.7%, 86.2% and 74.6% of our GWP in the
respective period and GWP generated from or through the platforms of our top five ecosystem partner
groups (in terms of GWP contribution) accounted for 98.9%, 95.3%, 80.8% and 66.4% of our GWP
in the respective period.
The table below sets forth a breakdown of the GWP generated from or through the platforms of
our top five ecosystem partner groups (in terms of GWP contribution but excluding those whose GWP
contribution is less than 1% of the total GWP for the periods indicated) in 2014, 2015, 2016 or the
three months ended March 31, 2017 and the total fees (referring to handling charges and commissions
and technical service fees, as applicable) charged by such ecosystem partner groups to us. With respect
to GWP, the respective percentage refers to the percentage of the total GWP for the periods indicated;
with respect to the total fees charged, the respective percentage refers to total fees charged as a
percentage of the GWP generated from or through the respective ecosystem partner group.

For the Year For the Year For the Year For the Three
Ended December Ended December Ended December Months Ended
Ecosystem Partner Group 31, 2014 31, 2015 31, 2016 March 31, 2017
RMB % RMB % RMB % RMB %
(in thousands, except percentages)

Alibaba, Ant Financial and


their subsidiaries (1)
GWP . . . . . . . . . . . . . . . 733,786 92.4 1,708,420 74.8 1,795,992 52.7 431,195 41.8
Total fees . . . . . . . . . . . 66,964 9.1 333,432 19.5 437,735 24.4 94,332 21.9
Ctrip and its subsidiaries
GWP . . . . . . . . . . . . . . . 44,313 5.6 297,935 13.0 702,413 20.6 178,785 17.4
Total fees . . . . . . . . . . . . 42,925 96.9 260,751 87.5 486,239 69.2 142,416 79.7
Xiaoying and its
subsidiaries
GWP . . . . . . . . . . . . . . . 1,147 0.1 137,496 6.0 190,454 5.6 52,759 5.1
Total fees . . . . . . . . . . . . — — 45,689 33.2 20,165 10.6 14,378 27.3
Fenqile
GWP . . . . . . . . . . . . . . . — — — — 29,478 0.9 21,144 2.1
Total fees . . . . . . . . . . . . — — — — — — — —
Xiaomi
GWP . . . . . . . . . . . . . . . 2,120 0.3 30,791 1.3 37,593 1.1 12,258 1.2
Total fees . . . . . . . . . . . . — — — — 2,164 5.8 3,301 26.9
iyunbao
GWP . . . . . . . . . . . . . . . — — — — 64,971 1.9 6,289 0.6
Total fees . . . . . . . . . . . . — — — — 21,837 33.6 2,016 32.1

Note:
(1) Alibaba works with Ant Financial Group to select companies to provide insurance solutions that can best serve consumer
needs arising from their respective platforms. According to the agreement we entered into with Ant Financial Group, Ant
Financial Group provides technology and consulting services to us, which facilitate the integration of our solutions into
the platforms of Alibaba, Ant Financal and their subsidiaries, including Taobao Marketplace (淘寶), Juhuasuan (聚划算),
Jiyoujia (極有家), Tmall (天貓), Zhaocaibao (招財寶) and Alipay (支付寶).

Online travel agencies in China generally charge high rates of handling charges and commissions
and technical service fees, primarily because (i) travel related insurance products tend to be
standardized and insurance providers mainly rely on price competition; and (ii) travel-related
insurance products on average have a low loss ratio.

— 7 —
SUMMARY

See “Business — Sales Channels — Ecosystem Partners” for a description of pricing mechanisms
for technical service fees and handling charges and commissions charged by our top five ecosystem
partner groups.

Our ecosystem partners generally charge us handling charges and commissions and/or technical
service fees for the sale of our products through their platforms. Handling charges and commissions
or technical service fees charged by most of our ecosystem partners are based on fixed percentages
of GWP generated from the relevant products, and the fee rates vary by products. In the lifestyle
consumption ecosystem, for certain products embedded into the platforms of Ant Financial and its
related parties, technical service fees also take into account the amount of claims settled. We and Ant
Financial generally use this fee structure for products that are not yet well established and have short
claims settlement cycles, such as Shipping Return Policy and Merchant Performance Bond Insurance.
For more details on the platform service fees paid to Ant Financial and/or its associates, please refer
to the section headed “Relationship with Connected Persons — Non-exempt Continuing Connected
Transactions — Transaction with Ant Financial Group and its Associates — Online platform
cooperation agreement between Ant Financial and/or its associates and us — Pricing Policies” in this
prospectus. In addition, the fee arrangements are usually on a short-term basis, and the terms will be
re-negotiated every one to two years. Some of our ecosystem partners, for example Tmall, Alipay,
Xiaomi and Ctrip, were also among our top policyholders during the Track Record Period. We are able
to access certain data if authorized by the customers on the platforms of our ecosystem partners.

Some of our ecosystem partners are also our shareholders or related parties. In 2014, 2015 and
2016 and the three months ended March 31, 2017, our GWP generated from or through our
shareholders and related parties accounted for 98.0%, 87.9%, 73.4% and 59.3% of our total GWP,
respectively. We expect that the GWP generated from or through our shareholders and related parties
will continue to account for a large amount of our total GWP going forward. However, our continuous
cooperative arrangements with our shareholders and related parties in the future are subject to certain
risks. See “Risk Factors — Risks Relating to Our Business — We historically derived a majority of
our total income through partnering with our shareholders and related parties, and the synergy value
and cross-selling effect from these partnerships may decrease in the future. Some of our shareholders
and related parties offer products competing with ours.” For further details on connected transactions,
see section headed “Relationship with Connected Persons” and for further details on related party
transactions, see section headed “Appendix I Accountant’s Report”.

In addition to our ecosystem partners’ platforms, we sell certain insurance products through
insurance agents or other channels. For example, we currently sell a large portion of our health
insurance products through insurance agents. We generally pay insurance agents handling charges and
commissions in proportion to the GWP generated.

We also extend our customer reach and grow our customer base on our own platform. We have
developed whole-network insurance products and solutions covering multiple platforms and
distributed them on our own channels, such as our mobile application, websites, WeChat public
accounts and QQ public account. We actively seek cross-selling opportunities among customers to
maximize customers’ lifetime value.

ASSET MANAGEMENT

Our investing activities consist of cooperating with third-party asset management companies and
purchasing asset management products. We had total investment assets of RMB1,149.6 million,
RMB7,706.0 million, RMB7,837.3 million and RMB7,737.7 million as of December 31, 2014, 2015
and 2016 and March 31, 2017, respectively. Total investment assets represented 83.9%, 95.5%, 84.0%
and 90.4% of our total assets as of December 31, 2014, 2015 and 2016 and March 31, 2017,
respectively. As of March 31, 2017, stocks, wealth management products and trusts represented
approximately 21.4%, 14.3% and 11.4% of our total investment assets, respectively. Our total
investment yield was 7.3%, 12.6%, 1.8%, -2.9% and -0.0% in 2014, 2015 and 2016 and the three
months ended March 31, 2016 and 2017, respectively. See “Business — Asset Management” for more
details.

— 8 —
SUMMARY

We strictly comply with the requirements of relevant PRC laws and regulations and implement
prudent risk management by establishing a comprehensive and integrated asset management
framework to ensure that our assets are properly managed. See “Business — Asset Management” for
more details regarding our investment guidelines and risk management measures. However, our
investment returns, and thus our profitability, may be materially and adversely affected by conditions
affecting our investments. See “Risk Factors — Risks relating to Our Business — Our investment
portfolio is subject to volatility of the PRC securities market and may expose us to unrated instruments
and illiquid assets risk, and the investment assets may experience sharp declines in their returns or
suffer significant losses, which would have a material adverse effect on our results of operations and
financial condition.” in this prospectus.

OUR TECHNOLOGY
We believe our proprietary technologies and infrastructure are critical to our success. We have
made significant investments in developing a proprietary and scalable technology platform which is
our unique competitive edge. We operate our core insurance system on a cloud-based platform. We
further developed an open platform in order to connect with the growing number of ecosystem
partners. We also apply cutting-edge technologies such as artificial intelligence and big data analytics
in marketing, underwriting, pricing and claims processing. In July 2016, we established a
wholly-owned subsidiary, ZhongAn Technology, which focuses on research and development of
financial technology solutions.

RISK MANAGEMENT
Management of risk exposure is fundamental to our operations. We have established a
comprehensive, enterprise-wide integrated and technology-driven risk management framework to
manage risks across our operations on a continuous basis. We apply our big data analytics capability
and machine learning technology to assist our risk management efforts. The organizational structure
of our risk management system include: Board of Directors, risk management committee, senior
management, risk management department, legal and compliance department, finance department,
actuarial department, operation management center, information and technology department, the
various business departments, internal control department and other related departments.
With our compliance-focused capabilities, we developed our systematic enterprise risk
management framework, which sets forth our policies of determining the risk limits and adopts the
standards of our accounting and statutory metrics. We use our own risk and solvency assessment to
evaluate all material risks that could affect our ability to meet policyholder obligations, including
market risks, credit and underwriting risks, liquidity risks, and operational risks. We have also
established a series of policies and procedures relating to our internal control and management of
internal audit risks and financial reporting risks. These policies and procedures are carried out on an
on-going basis to deal with the various types of risks encountered by us during our internal control
and financial management and to better help us achieve our business objectives.

OVERVIEW OF THE PRC INSURANCE MARKET


Insurance provides financial protection against various forms of losses, such as the loss of
property, life or health. Insurance also plays an important role in individual and family financial
planning. The PRC insurance market has experienced rapid growth in recent years, increasing from
RMB1.4 trillion in 2011 to RMB3.1 trillion in 2016 as measured by GWP, representing a CAGR of
17.2%, according to the Oliver Wyman Report.
Although the size of the PRC insurance market had become the second largest in the world as
measured by GWP in 2016 according to the Oliver Wyman Report, insurance penetration and density
in China are still substantially lower than those in developed countries, indicating significant growth
potential. According to the Oliver Wyman Report, in 2015, GWP only represented 3.6% of GDP in
China, compared with 10.9%, 9.9%, 7.3% and 6.3% in Japan, the United Kingdom, the United States
and Germany, respectively.

The PRC Insuretech Market


The Insuretech market is created by the dynamic interplay of insurance and technology.
According to the Oliver Wyman Report, the PRC Insuretech market consists of three segments: online
distribution, technology-enabled upgrade, and ecosystem-oriented innovation. Ecosystem-oriented

— 9 —
SUMMARY

innovation represents the most novel expansion of the traditional insurance industry by covering
previously unaddressed risks. Not only does ecosystem-oriented innovation increase the scope of the
insurance market, it also helps drive further growth of the relevant ecosystems by strengthening
customer confidence and improving the customer experience.
According to the Oliver Wyman Report, the PRC Insuretech market as measured by GWP was
RMB363 billion in 2016, and is expected to grow at a rapid pace in the next few years, reaching
RMB1,413 billion in 2021, representing a CAGR of 31.2%. The most innovative Insuretech segment,
ecosystem-oriented innovation, is expected to grow particularly fast at a CAGR of 62.0%, compared
with 26.1% and 41.1% for online distribution and technology-enabled upgrade segments, respectively.
Insurance going online is a rising trend in China. In 2016, of the 9.5 billion newly written policies
recorded by the CIRC, approximately 65% were sold online.
We mainly operate in the nascent ecosystem-oriented sub-segment of the Insuretech market,
which only accounted for a small percentage of the Insuretech market as of 2016. The
ecosystem-oriented market is very fragmented as increasingly more traditional insurers are entering
this market. Although we are the leader among the few online-only insurance companies, we only
accounted for 17% of this sub-segment and 0.9% of the PRC Insuretech market in 2016, according to
the Oliver Wyman Report.
The ecosystem-oriented innovation segment is mainly covered by online-only insurance
companies and traditional insurance companies with a significant online presence. Online-only
insurance companies tend to have stronger ability to develop insights from large amounts of customer
data than traditional insurers, but some traditional insurers are also making investments to capture
ecosystem related opportunities. The ecosystem-oriented innovation segment is becoming more
populated as an increasing number of traditional insurers have begun to utilize technology to provide
similar products such as shipping return insurance, flight delay or accident insurance. As a result,
some of our products are facing more intense competition. For example, our GWP from shipping
return insurance decreased from 2015 to 2016 partly because there were new market entrants
providing shipping return insurance on the platforms of our major e-commerce ecosystem partners,
such as Taobao Marketplace.

OUR COMPETITIVE STRENGTHS


We believe the following competitive strengths contribute to our success and differentiate us
from our competitors:
• The largest online-only insurance company in China’s fast-growing Insuretech market;
• Innovative and scalable business model;
• Proprietary technologies and powerful cloud-based infrastructure;
• Extensive user data and strong data analytics capabilities;
• Sound corporate governance and robust risk management; and
• Visionary management team and entrepreneurial corporate culture with support from
shareholders.
For a detailed discussion of these competitive strengths, see “Business — Our Strengths”.

OUR STRATEGIES
To achieve our mission, we intend to leverage our existing strengths and pursue the following
strategies:
• Further grow our customer base and GWP;
• Enhance our profitability by expanding and optimizing the product mix;
• Strengthen our technology leadership and big data analytics capabilities;
• Further drive operating efficiency; and
• Foster sustainable ecosystems by connecting with more ecosystem partners.
For a detailed discussion of these strategies, see “Business — Our Strategies”.

— 10 —
SUMMARY

RISK FACTORS

Our business and the Global Offering involve certain risks, which are set out in the section
headed “Risk Factors.” You should read that section in its entirety carefully before you decide to
invest in our H Shares. Some of the major risks we face include:

• We may continue to incur net loss;


• Risks associated with operating in an emerging, dynamic and competitive industry, our
limited operating history, and our ability to effectively manage our growth, control our
expenses or implement our business strategies;
• Our recent business growth and profitability might not be indicative for future periods;
• Our dependence on partnering with our shareholders and their related parties as well as our
cooperation with other ecosystem partners and other participants in the ecosystems;
• Difference in actual benefits and claims from the assumptions used in pricing and setting
reserves for our insurance products may materially and adversely affect our results of
operations and financial condition;
• Competition in the PRC insurance market, in particular, our business model being
replicated quickly by internet companies as well as traditional insurance companies and
financial institutions aiming to engage in Insuretech business;
• Failure to meet solvency margin ratio requirements, which could expose us to regulatory
actions and could force us to change our business strategies or slow down our growth;
• Credit cycle risk and the risk of deterioration of credit profiles of borrowers in our
consumer finance ecosystem;
• Credit or other information we receive about a borrower not being accurate or not
accurately reflective of borrower’s credit worthiness;
• The success and growth of our business rely on the development of the e-commerce
industry in China;
• Effectiveness of our risk management and internal control systems, as well as the risk
management tools available to us in identifying or mitigating risks to which we are
exposed;
• Risks relating to our intellectual property, technology infrastructure and data analytics; and
• Risks relating to government regulations on insurance companies, internet insurance and
internet financial service businesses.

— 11 —
SUMMARY

SUMMARY OF HISTORICAL FINANCIAL INFORMATION

The following tables set forth summary financial data from our consolidated financial
information for the Track Record Period, extracted from the Accountant’s Report set out in Appendix
I to this prospectus. The summary consolidated financial data set forth below should be read together
with, and is qualified in its entirety by reference to, the consolidated financial statements in this
prospectus, including the related notes. Our consolidated financial information was prepared in
accordance with HKFRS.

SUMMARY CONSOLIDATED INCOME STATEMENT

The following table sets forth our consolidated income statements for the periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,
2014 2015 2016 2016 2017
(in thousands of RMB)
(unaudited)

Gross written premiums . . . . . . . . . . . . . 794,097 2,283,042 3,408,048 604,401 1,030,363


Less: Premiums ceded to reinsurers . . . . (7,265) (10,443) (39,632) (3,516) (35,954)
Net written premiums. . . . . . . . . . . . . . . 786,832 2,272,599 3,368,416 600,885 994,409
Less: Net change in unearned premium
reserves . . . . . . . . . . . . . . . . . . . . . . . (74,647) (351,105) (143,004) (31,706) (107,632)
Net premiums earned . . . . . . . . . . . . . . 712,185 1,921,494 3,225,412 569,179 886,777
Net investment income . . . . . . . . . . . . . . 80,062 520,684 98,624 (167,093) 95,552
Net fair value gains through profit or
loss . . . . . . . . . . . . . . . . . . . . . . . . . . 9,914 40,611 41,843 (52,435) (96,555)
Other operating income . . . . . . . . . . . . . 15,376 26,556 46,841 204 10,120
Other income . . . . . . . . . . . . . . . . . . . . 105,352 587,851 187,308 (219,324) 9,117
Total income . . . . . . . . . . . . . . . . . . . . . 817,537 2,509,345 3,412,720 349,855 895,894
Net claims incurred . . . . . . . . . . . . .... (522,903) (1,316,269) (1,355,293) (265,555) (396,713)
Handling charges and commissions .... (16,154) (100,641) (287,109) (44,600) (115,465)
Finance costs . . . . . . . . . . . . . . . . . .... (5,702) (3,078) (203) (157) (445)
Other operating and administrative
expenses . . . . . . . . . . . . . . . . . . . .... (236,194) (1,029,764) (1,757,100) (333,235) (605,975)
Total benefits, claims and expenses . . (780,953) (2,449,752) (3,399,705) (643,547) (1,118,598)
Operating profit/(loss) before income
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,584 59,593 13,015 (293,692) (222,704)
Income tax expense . . . . . . . . . . . . . . . . 397 (15,336) (3,643) 38,307 20,608
Net profit/(loss) for the period. . . . . . . 36,981 44,257 9,372 (255,385) (202,096)

We recorded an underwriting loss of RMB61.5 million, RMB511.6 million and RMB153.1


million, respectively, and our combined ratio was 108.6%, 126.6% and 104.7%, respectively. Our net
profit from 2014 to 2016 was mainly driven by our net investment income, which increased from
RMB80.1 million in 2014 to RMB520.7 million in 2015 and then decreased to RMB98.6 million in
2016. Our net investment income has fluctuated and will continue to fluctuate subject to the
performance of the PRC securities market.

— 12 —
SUMMARY

SUMMARY CONSOLIDATED FINANCIAL POSITION

Assets
As of December 31, 2014, 2015 and 2016 and March 31, 2017, our total assets were RMB1,369.5
million, RMB8,069.1 million, RMB9,332.2 million and RMB8,556.1 million, respectively. The
following table sets forth the principal components of our assets as of the dates indicated:

As of December 31, As of March 31,


2014 2015 2016 2017
(in thousands of RMB)

Financial assets
Restricted statutory deposits . . . . . . 200,000 248,125 248,125 248,125
Investments classified as loans and
receivables . . . . . . . . . . . . . . . . . . 408,299 1,207,896 1,707,648 1,716,451
Available-for-sale financial assets . . 368,130 3,556,804 3,670,260 3,163,042
Financial assets at fair value
through profit or loss . . . . . . . . . . 121,486 1,321,398 1,599,230 1,694,232
Securities purchased under
agreements to resell . . . . . . . . . . . 50,000 — 302,300 800
Cash and cash equivalents . . . . . . . . 141,696 1,374,897 1,153,244 1,054,646
Total financial assets . . . . . . . . . . . . . 1,289,611 7,709,120 8,680,807 7,877,296
Assets other than financial assets (1) . 79,850 360,023 651,416 678,809
Total assets . . . . . . . . . . . . . . . . . . . . 1,369,461 8,069,143 9,332,223 8,556,105

Note:
(1) Assets other than financial assets included receivables, fixed and intangible assets, and other miscellaneous assets.

Liabilities
As of December 31, 2014, 2015 and 2016 and March 31, 2017, our total liabilities were
RMB348.9 million, RMB1,170.8 million, RMB2,473.3 million and RMB1,909.9 million, respectively.
The following table sets forth the principal components of our liabilities as of the dates indicated:

As of December 31, As of March 31,


2014 2015 2016 2017
(in thousands of RMB)

Insurance contract liabilities


Unearned premium reserves . . . . . . . 87,459 441,579 601,256 722,989
Claim reserves . . . . . . . . . . . . . . . . 35,546 174,652 196,049 245,673
Total insurance contract liabilities . . . 123,005 616,231 797,305 968,662
Financial liabilities
Policyholders’ deposits . . . . . . . . . . — 12 211 203
Investment contract liabilities . . . . . — 1,562 573,069 137,196
Securities sold under agreements to
repurchase . . . . . . . . . . . . . . . . . . 140,000 1,600 282,674 2,300
Total financial liabilities . . . . . . . . . . . 140,000 3,174 855,954 139,699
Liabilities other than insurance
contract liabilities and financial
liabilities . . . . . . . . . . . . . . . . . . . . 85,894 551,420 819,992 801,504
Total liabilities . . . . . . . . . . . . . . . . . 348,899 1,170,825 2,473,251 1,909,865

— 13 —
SUMMARY

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS


The following table sets forth our cash flows for the periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,
2014 2015 2016 2016 2017
(in thousands of RMB)
(unaudited)

Net cash generated from/(used in)


operating activities . . . . . . . . . . . 119,619 300,547 853,387 43,292 (518,053)
Net cash (used in)/generated from
investing activities . . . . . . . . . . . (143,084) (4,662,365) (1,355,921) (657,885) 700,305
Net cash generated from/(used in)
financing activities . . . . . . . . . . . 134,298 5,595,019 280,872 63,543 (280,819)
Net effect of foreign exchange rate
changes on cash . . . . . . . . . . . . . — — 9 (1) (31)
Net increase/(decrease) in cash
and cash equivalents. . . . . . . . . . 110,833 1,233,201 (221,653) (551,051) (98,598)
Cash and cash equivalents at
beginning of the period . . . . . . . 30,863 141,696 1,374,897 1,374,897 1,153,244
Cash and cash equivalents at the
end of the period . . . . . . . . . . . . 141,696 1,374,897 1,153,244 823,846 1,054,646

We had net cash outflows used in operating activities of RMB518.1 million in the three months
ended March 31, 2017 compared with net cash inflows from operating activities of RMB43.3 million
in the three months ended March 31, 2016, primarily due to cash used in the three months ended March
31, 2017 for the redemption of previously outstanding investment-linked insurance products, which
we stopped selling in January 2017 in accordance with a new CIRC regulation.

SOLVENCY MARGIN RATIO

The solvency margin ratio is a measure of capital adequacy for PRC insurance companies and is
calculated by dividing the actual capital, which is the difference between an insurance company’s
admitted assets and admitted liabilities as determined by the CIRC, by a statutory minimum capital.
Insurance companies carrying out business in China must comply with requirements on the solvency
margin ratio imposed by the CIRC. An insurance company is non-compliant with the solvency
requirement if its solvency margin ratio is less than 100%. If it is between 100% and 150%, the CIRC
could order the insurance companies in question to submit and implement appropriate plans to prevent
any further deterioration of the ratio. The China Risk Oriented Solvency System (C-ROSS), a
new-generation solvency system developed by the CIRC, took effect in 2016. During the Track Record
Period, we maintained our solvency ratio in compliance with the minimum requirement by the CIRC
before and after the transition to C-ROSS. Under the older solvency system, our solvency margin ratio
was 714.9% and 1,620.4% as of December 31, 2014 and 2015, respectively. Under C-ROSS, our
comprehensive solvency margin ratio was 722.5% and 638.3% as of December 31, 2016 and March
31, 2017, respectively. Our comprehensive solvency margin ratio increased significantly from
December 31, 2014 to December 31, 2015 mainly due to increased assets resulting from the issuance
of new shares in June 2015. Our comprehensive solvency margin ratio decreased subsequent to
December 31, 2015 mainly due to an increase in our statutory minimum capital, which in turn was
partly due to the transition to C-ROSS and partly due to the growth in our GWP.

— 14 —
SUMMARY

KEY FINANCIAL RATIOS


The following table sets forth our key financial ratios for the periods or as of the dates indicated:

For the Year Ended or For the Three Months


as of December 31, Ended or as of March 31,

2014 2015 2016 2016 2017

(unaudited)

Retention ratio (1) . . . . . . . . . . . . . . . . . . 99.1% 99.5% 98.8% 99.4% 96.5%


Loss ratio (2) . . . . . . . . . . . . . . . . . . . . . . 73.4% 68.5% 42.0% 46.7% 44.7%
Expense ratio (3) . . . . . . . . . . . . . . . . . . . 35.2% 58.1% 62.7% 65.6% 78.4%
Combined ratio (4) . . . . . . . . . . . . . . . . . . 108.6% 126.6% 104.7% 112.3% 123.1%
Net investment yield (5) . . . . . . . . . . . . . . 4.8% 3.5% 3.6% 0.9% 2.0%
Total investment yield (6) . . . . . . . . . . . . 7.3% 12.6% 1.8% (2.9%) (0.0%)
Return on assets (7) . . . . . . . . . . . . . . . . . 2.7% 0.9% 0.1% (3.2%) (2.3%)
Return on equity (8) . . . . . . . . . . . . . . . . . 3.7% 1.1% 0.1% (3.8%) (3.0%)
Gearing ratio (9) . . . . . . . . . . . . . . . . . . . 25.5% 14.5% 26.5% 16.5% 22.3%

Notes:
(1) Retention ratio equals net written premiums, which is gross written premiums less premiums ceded to reinsurer, as a
percentage of gross written premiums.
(2) Loss ratio equals net claims incurred as a percentage of net premiums earned. Our loss ratio decreased during the Track
Record Period primarily due to the continuous improvement in our risk management measures and the growth of
insurance products with relatively low loss ratios, such as travel-related accident insurance and health insurance
products.
(3) Expense ratio equals insurance operating expenses, expressed as a percentage of net premiums earned. Our expense ratio
significantly increased during the Track Record Period primarily as we continue to focus on accident insurance products,
which tend to involve higher rate of handling charges and commissions and technical service fees compared to our other
types of insurance products, and as a result of increased expenses related to employee benefit expenses, depreciation and
amortization expenses and promotional expenses as we continued to expand our operations.
(4) Combined ratio equals the sum of loss ratio and expense ratio.
(5) Net investment yield equals the sum of net interest income and dividend income less interest expense relating to
securities sold under agreements to repurchase for the period as a percentage of the average of the opening and closing
balances of total investment assets of the period (in the case of 2015 and 2016 and the three months ended March 31,
2016 and 2017) or the closing balance of total investment assets of the period (in the case of 2014).
(6) Total investment yield equals total investment income (defined as the sum of net investment income and net fair value
gains through profit or loss, less interest expense relating to securities sold under agreements to repurchase) for the
period as a percentage of the average of the opening and closing balances of total investment assets of the period (in the
case of 2015 and 2016 and the three months ended March 31, 2016 and 2017) or the closing balance of total investment
assets of the period (in the case of 2014).
(7) Return on assets equals profit for the period divided by the average of the opening and closing balances of total assets
of the period (in the case of 2015 and 2016 and the three months ended March 31, 2016 and 2017) or divided by the
closing balance of total assets of the period (in the case of 2014).
(8) Return on equity equals profit for the period divided by the average of the opening and closing balances of total equity
of the period.
(9) Gearing ratio is represented by total liabilities (excluding capital supplementary bonds and subordinated term debts)
divided by total assets.
Please refer to the section headed “Financial Information — Selected Financial Ratios” for a
discussion of movements of the above financial ratios during the Track Record Period.

RECENT DEVELOPMENTS
Our Directors are responsible for the preparation of our unaudited condensed consolidated
financial statements for the six months ended June 30, 2017 in accordance with Hong Kong
Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified
Public Accountants. Our interim condensed consolidated financial statements for the six months ended
June 30, 2017 have been reviewed by our reporting accountant, PricewaterhouseCoopers, Certified
Public Accountants, Hong Kong, in accordance with Hong Kong Standard on Review Engagements
2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”

— 15 —
SUMMARY

issued by the Hong Kong Institute of Certified Public Accountants. Based on these reviewed but
unaudited financial statements, our gross written premiums increased by 84.3% from RMB1,351.9
million in the six months ended June 30, 2016 to RMB2,491.9 million in the six months ended June
30, 2017, primarily due to significant increases in gross written premiums from health insurance,
accident insurance, liability insurance and shipping return insurance. However, our loss ratio
increased from 41.0% in the six months ended June 30, 2016 to 52.8% in the six months ended June
30, 2017, mainly due to (i) significant increases in insurance claims paid and net increase in claim
reserve in relation to credit insurance, a product type that we started to focus on in 2017; and (ii) a
significant increase in our unearned premium reserves mainly due to the rapid growth of longer-term
products such as health insurance and credit insurance. Our expense ratio increased from 70.9% in the
six months ended June 30, 2016 to 76.5% in the six months ended June 30, 2017, mainly due to
increases in other operating and administrative expenses, and handling charges and commissions. The
increase in other operating and administrative expenses was primarily due to an increase in staff costs
and overhead expenses resulting from an expanding workforce to grow our business in accordance
with our business plans. The increase in handling charges and commissions was primarily due to the
change in our product mix. In particular, health insurance, which tends to incur higher rates of
handling charges and commissions than our other insurance products, grew rapidly from the six
months ended June 30, 2016 to the six months ended June 30, 2017 and accounted for a growing
percentage of our total gross written premiums. As a result of the foregoing, our combined ratio
increased from 111.8% in the six months ended June 30, 2016 to 129.3% in the six months ended June
30, 2017, indicating a continuing underwriting loss. Our overall net loss was RMB286.8 million in the
six months ended June 30, 2017, compared with a net loss of RMB228.3 million for the same period
in 2016. We expect to continue to incur an underwriting loss for the years ending December 31, 2017
and 2018.
Our Directors confirm that, up to the date of this prospectus, other than as disclosed above and
in the section headed “— Overview — Net Loss in 2017”, there has been no event since March 31,
2017 that would materially affect the information as set out in the Accountant’s Report included in
Appendix I to this prospectus.

APPROVED NAME FOR CARRYING ON BUSINESS IN HONG KONG


We were incorporated in the PRC on October 9, 2013 as a joint stock limited company under the
name of 眾安在綫財產保險股份有限公司 after receiving approval from the CIRC. We are registered
as a non-Hong Kong company with the Registrar of Companies in Hong Kong under Part 16 of the
Companies Ordinance and we carry on business in Hong Kong as “ZA Online Fintech P & C” as
approved by and registered with the Registrar of Companies on September 6, 2017 and September 13,
2017, respectively.

PRE-IPO INVESTMENTS
The Company completed its series A capital raising with the Pre-IPO Investors on June 7, 2015.
The Pre-IPO Investors paid in RMB5,775,000,000 for the subscription of an aggregate of 240,625,000
Foreign Shares at a price of RMB24 per Share. The allotment of Shares under the Pre-IPO Investments
was completed on June 7, 2015. After the allotment, our registered capital increased from
RMB1,000,000,000 to RMB1,240,625,000. The below table is a summary of the number of shares held
by the Pre-IPO Investors before and after completion of the Pre-IPO Investments, the consideration
paid and percentage of shareholding immediately prior to and after Listing:

Ownership
percentage as
Number of of the Listing
shares before Ownership Date (assuming
completion of percentage as Over-allotment
Pre-IPO Number of Consideration of the date of Option is not
Shareholders Investments Shares paid (RMB) this prospectus exercised)

Morgan Stanley Asia Securities — 30,730,833 737,539,992 2.4770% 2.1342%


Products LLC . . . . . . . . . . .
CICC Securities (HK) Limited . . — 31,250,000 750,000,000 2.5189% 2.1703%
CDH Avatar, L.P. . . . . . . . . . . — 62,000,000 1,488,000,000 4.9975% 4.3058%
Keywise ZA Investment . . . . . . — 61,189,167 1,468,540,008 4.9321% 4.2495%
Equine Forces Limited
Partnership . . . . . . . . . . . . — 55,455,000 1,330,920,000 4.4699% 3.8513%
Total . . . . . . . . . . . . . . . . . — 240,625,000 5,775,000,000 19.3954% 16.7110%

— 16 —
SUMMARY

ADMINISTRATIVE PROCEEDINGS AND NON-COMPLIANCE


During the Track Record Period and up to the Latest Practicable Date, we did not commit any
material non-compliance of the laws or regulations, and we did not experience any systemic
non-compliance incidents, which taken as a whole, in the opinion of our Directors, are likely to have
a material and adverse effect on our business, financial condition or results of operations. During the
same periods, we also did not experience any non-compliance of the laws or regulations, which taken
as a whole, in the opinion of the Directors, reflects negatively on the ability or tendency of our
Company, the Directors or our senior management, to operate our business in a compliant manner. Our
PRC Legal Advisor is of the opinion that, we have complied with all relevant PRC laws and
regulations in all material respects during the Track Record Period and up to the Latest Practicable
Date. See the section headed “Business — Administrative Proceedings and Non-compliance” for a
summary of our certain non-compliance matters during the Track Record Period.

FUTURE DIVIDENDS
PRC laws require that dividends be paid only out of the profit for the year calculated according
to PRC accounting principles, which differ in many aspects from the generally accepted accounting
principles in other jurisdictions, including HKFRS. Distributions from us and our subsidiaries may
also become subject to any restrictive covenants in bank credit facilities, convertible bond instruments
or other agreements that we or our subsidiaries may enter into in the future.
The amount of dividend actually distributed to our shareholders will depend upon our earnings
and financial condition, operating requirements, capital requirements and any other conditions that our
Directors may deem relevant and will be subject to approval of our shareholders. Our Board has the
absolute discretion to recommend any dividend.
We have not previously declared or paid cash dividends and we cannot declare or pay any
dividends in the near future on our H Shares so long as we continue to be loss-making.

GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part of the
Global Offering. The Global Offering comprises:
(i) the Hong Kong Public Offering of 9,964,800 Offer Shares (subject to adjustment) in Hong
Kong as described in the section headed “Structure of the Global Offering — The Hong
Kong Public Offering” in this prospectus; and
(ii) the International Offering of an aggregate of initially 189,329,100 Shares (subject to
adjustment and the Over-allotment Option), (a) in the United States to QIBs in reliance on
Rule 144A or another available exemption; and (b) outside the United States in reliance on
Regulation S (including to professional and institutional investors in Hong Kong).
The Offer Shares will represent 13.84% of the issued share capital of our Company immediately
following the completion of the Global Offering, assuming the Over-allotment Option is not exercised.
If the Over-allotment Option is exercised in full, and the Offer Shares will represent approximately
15.59% of the issued share capital of our Company immediately following the completion of the
Global Offering.
We have applied to the Listing Committee for the granting of the listing of, and permission to
deal in, our H Shares in issue and to be issued pursuant to the Global Offering (including the
additional H Shares which may be issued pursuant to the exercise of the Over-allotment Option), on
the basis that, among other things, we satisfy the market capitalization/revenue test under Rule 8.05(3)
of the Listing Rules with reference to (i) our total income for the year ended December 31, 2016, being
approximately RMB3,412.7 million (equivalent to approximately HK$4,077.9 million), is over
HK$500 million; and (ii) our expected market capitalization at the time of Listing, which based on the
low-end of the indicative Offer Price range, exceeds HK$4 billion.

— 17 —
SUMMARY

OFFERING STATISTICS
All statistics in the following table are based on the assumptions that (i) the Global Offering has
been completed and 199,293,900 H Shares are issued pursuant to the Global Offering; and (ii)
1,439,918,900 Shares are issued and outstanding following the completion of the Global Offering.

Based on an Offer Based on an Offer


Price of HK$53.70 Price of HK$59.70

Market capitalisation of our Shares (1) . . . . . . . . . . . . . . . . . . . . . . . HK$77,324 million HK$85,963 million


HK$12.57 HK$13.38
(2)
Unaudited pro forma adjusted net tangible asset per Share . . . . . . . . . (RMB10.52) (RMB11.20)

Notes:
(1) The calculation of market capitalisation is based on 1,439,918,900 Shares expected to be in issue immediately upon
completion of the Global Offering.
(2) The unaudited pro forma adjusted net tangible asset per Share as at March 31, 2017 is calculated after making the
adjustments referred to in Appendix II to this prospectus and on the basis that 1,439,918,900 Shares are expected to be
in issue immediately upon completion of the Global Offering.

For the calculation of the unaudited pro forma adjusted net tangible asset value per Share
attributed to our Shareholders, see the section headed “Unaudited Pro Forma Financial Information”
in Appendix II to this prospectus.

LISTING EXPENSES
Based on the mid-point Offer Price of HK$56.70, the total estimated listing related expenses
payable by us in relation to the Global Offering is approximately RMB294.6 million (or approximately
RMB58.2 million after excluding underwriting fees and commissions and incentive fees of
approximately RMB236.4 million). We estimate that listing expenses of RMB11.9 million will be
charged to our consolidated statements of comprehensive income for the year ending December 31,
2017, and RMB282.7 million is expected to be capitalized and accounted for as a deduction from
equity. These listing expenses mainly comprise professional fees paid and payable to the Joint
Sponsors, Joint Bookrunners, the Underwriters, legal advisors and the reporting accountant for their
services rendered in relation to the Listing and the Global Offering. Our Directors do not expect such
expenses to have a material adverse impact on our financial results for the year ending December 31,
2017.

USE OF PROCEEDS
We estimate that the net proceeds from the Global Offering which the Company will receive,
assuming an Offer Price of HK$56.70 (being the mid-point of the Offer Price range), will be
approximately HK$10,948 million, after deducting the estimated underwriting fees and commissions,
incentive fees and expenses in relation to the Global Offering payable by the Company.
We intend to use the net proceeds from the Global Offering for strengthening our capital base
to support our business growth. Pending the deployment of the net proceeds from the Global Offering
as described, the Company currently intends to invest such net proceeds in short-term interest bearing
deposits and/or money market instruments.
In the event the Over-allotment Option is exercised in full and assuming an Offer Price of
HK$56.70 (being the mid-point of the Offer Price range), the net proceeds to be received will be
approximately HK$12,601 million, after deducting the estimated underwriting fees and commissions,
incentive fees and expenses in relation to the Global Offering payable by the Company.

— 18 —
DEFINITIONS

In this prospectus, unless the context otherwise requires, the following expressions shall have the
following meanings.

“affiliate” with respect to any specified person, any other person,


directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified person

“Alibaba” Alibaba Group Holding Ltd. (阿里巴巴集團控股有限公司), a


Chinese e-commerce company listed on the New York Stock
Exchange (NYSE: BABA)

“Alipay” Alipay (China) Internet Technology Co., Ltd. (支付寶(中國)


網絡技術有限公司), a company incorporated in the PRC and
a wholly owned subsidiary of Ant Financial

“An Xin” An Xin Property and Casualty Insurance Co., Ltd. (安心財產
保險有限責任公司), an online insurance company
incorporated in the PRC

“Ant Financial” Ant Small and Micro Financial Services Group Co., Ltd. (浙
江螞蟻小微金融服務集團股份有限公司), a limited liability
company incorporated in the PRC (formerly known as
Zhejiang Alibaba E-Commerce Co., Ltd. (浙江阿里巴巴電子
商務有限公司) and incorporated on October 19, 2000) and
one of our substantial shareholders

“Ant Financial Group” Ant Financial and its subsidiaries

“Application Form(s)” the WHITE Application Form(s), YELLOW Application


Form(s) and GREEN Application Form(s) or, where the
context so requires, any of them

“Articles of Association” or the articles of association of the Company conditionally


“Articles” adopted on November 14, 2016 with effect from the Global
offering becoming unconditional on the Listing Date, as
amended from time to time, a summary of which is set out in
“Appendix V — Summary of Articles of Association”

“associate(s)” has the meaning ascribed thereto under the Listing Rules

“Bestpay” China Telecom Bestpay E-commerce Ltd. (天翼電子商務有限


公司), a company incorporated in the PRC and a
wholly-owned subsidiary of China Telecom

“Board” or “Board of Directors” the board of Directors of our Company

“Board of Supervisors” the board of Supervisors of our Company

— 19 —
DEFINITIONS

“business day” any day (other than a Saturday, Sunday or public holiday) on
which banks in Hong Kong are generally open for normal
banking business

“CAGR” compounded annual growth rate

“Cathay” Cathay Insurance Co., Ltd. (國泰財產保險有限責任公司), an


insurance company incorporated in the PRC

“CBRC” the China Banking Regulatory Commission (中國銀行業監督


管理委員會)

“CCASS” the Central Clearing and Settlement System established and


operated by HKSCC

“CCASS Account” a securities account maintained by a CCASS Participant with


CCASS

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing


participant or general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian


participant

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor


participant who may be an individual or joint individuals or a
corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian


Participant or a CCASS Investor Participant

“China CITIC Bank” China CITIC Bank Corporation Ltd. (中信銀行股份有限公


司), a bank incorporated in the PRC and listed on the Hong
Kong Stock Exchange (SEHK: 0998)

“China Electronics a non-profit institution engaged in standardization,


Standardization Institute” conformity assessment and measurement activities in the field
of electronic information technologies

“China Telecom” China Telecommunications Corporation Ltd (中國電信集團公


司), a telecommunications company incorporated in the PRC
and listed on the New York Stock Exchange (NYSE: CHA)
and the Hong Kong Stock Exchange (SEHK: 0728)

“CIRC” the China Insurance Regulatory Commission (中國保險監督


管理委員會)

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong
Kong), as amended or supplemented from time to time

— 20 —
DEFINITIONS

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions)


Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as
Ordinance” amended or supplemented from time to time

“Company”, “Our Company”, ZhongAn Online P & C Insurance Co., Ltd. (眾安在綫財產保
“we” or “us” 險股份有限公司), a joint stock limited company with limited
liability incorporated in the People’s Republic of China on
October 9, 2013 and carrying on business in Hong Kong as
“ZA Online Fintech P & C”

“CSRC” the China Securities Regulatory Commission (中國證券監督


管理委員會)

“Ctrip” Ctrip.com International Ltd. an online travel agency


incorporated in the Cayman Islands and listed on the Nasdaq
Global Select Market (NASDAQ: CTRP)

“Didi Chuxing” Didi Chuxing Technology Co., Ltd. (滴滴出行科技有限公司),


a company incorporated in the PRC

“Director(s)” the director(s) of the Company

“Domestic Shares” ordinary shares issued by the Company, with a nominal value
of RMB1, which are subscribed for or credited as paid in
RMB

“edaijia” edaijia.cn (e代駕), a mobile platform that enables consumers


to find and hire temporary drivers, operated by Beijing Yixin
Yixing Automotive Technical Development Service Co., Ltd.
(北京億心宜行汽車技術開發服務有限公司), a company
incorporated in the PRC

“Foreign Shares” ordinary shares issued by the Company, with a nominal value
of RMB1, which are subscribed for in a company other than
RMB

“DXY” or “DXY.cn” Ding Xiang Yuan (丁香園), a medical online social


networking service under Guanlan Network (Hangzhou) Co.,
Ltd. (觀瀾網絡(杭州)有限公司), a company incorporated in
the PRC

“FY” financial year ended or ending 31 December

“Fenqile” Shenzhen Fenqile Network Technology Co., Ltd. (深圳市分期


樂網絡科技有限公司), a company incorporated in the PRC

“Global Offering” the Hong Kong Public Offering and the International Offering

— 21 —
DEFINITIONS

“GREEN Application Form(s)” the application form(s) to be completed by the HK eIPO


White Form Service Provider designated by our Company

“Group”, “we”, “our” or “us” the Company and its subsidiaries, or where the context so
requires, in respect of the period before the Company became
the holding company of its present subsidiaries, such
subsidiaries could be viewed as if they were the subsidiaries
of the Company at the time

“H Share Registrar” Tricor Investor Services Limited

“H Shares” the overseas listed foreign invested ordinary shares in the


ordinary share capital of the Company, with a nominal value
of RMB1 each, which are to be subscribed for and traded in
Hong Kong dollars and for which an application has been
made for the granting of the approval for the listing of, and
permission to deal in, on the Hong Kong Stock Exchange, and
a “H Share” means any of them

“HK$” or “Hong Kong dollars” Hong Kong dollars, the lawful currency of Hong Kong

“HK eIPO White Form” the application for Hong Kong Offer Shares to be issued in the
applicant’s own name by submitting applications online
through the designated website of HK eIPO White Form at
www.hkeipo.hk

“HK eIPO White Form Service the HK eIPO White Form Service Provider designated by
Provider” our Company as specified on the designated website
www.hkeipo.hk

“HKFRS” the Hong Kong Financial Reporting Standards

“HKSCC” Hong Kong Securities Clearing Company Limited, a


wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of


HKSCC, in its capacity as nominee for HKSCC (or any
successor thereto) as operator of CCASS and any successor,
replacement or assign of HKSCC Nominees Limited as
nominee for the operator of CCASS

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Hong Kong Offer Shares” the 9,964,800 H Shares initially being offered by the
Company pursuant to the Hong Kong Public Offering (subject
to adjustment as described in “Structure of the Global
Offering”)

— 22 —
DEFINITIONS

“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares to the public in Hong
Kong for subscription at the Offer Price, subject to the terms
and conditions set out in this prospectus and the Application
Forms, as further described in “Structure of the Global
Offering”

“Hong Kong Stock Exchange” or The Stock Exchange of Hong Kong Limited
“Stock Exchange” or “SEHK”

“Hong Kong Underwriters” the underwriters listed in “Underwriting — Hong Kong


Underwriters”, being the underwriters of the Hong Kong
Public Offering

“Hong Kong Underwriting the underwriting agreement dated September 14, 2017
Agreement” relating to the Hong Kong Public Offering entered into
between the Company, J.P. Morgan Securities (Asia Pacific)
Limited, J.P. Morgan Securities (Far East) Limited, Credit
Suisse (Hong Kong) Limited, UBS AG Hong Kong Branch,
UBS Securities Hong Kong Limited, CMB International
Capital Limited and the Hong Kong Underwriters, as further
described in “Underwriting”

“Huatai” Huatai Insurance Group Co., Ltd. (華泰保險集團股份有限公


司), an online insurance company incorporated in the PRC

“Independent Third Party(ies)” an individual or a company who is not connected with (within
the meaning of the Listing Rules) any Directors, Supervisors,
chief executive or substantial shareholders of the Company,
its subsidiaries or any of their respective associates

“International Offer Shares” the 189,329,100 H Shares initially being offered by the
Company pursuant to the International Offering (subject to
reallocation as described in “Structure of the Global
Offering”) together with, where relevant, up to an additional
29,894,000 H Shares which may be issued pursuant to any
exercise of the Over-allotment Option

“International Offering” the offer of the International Offer Shares (a) in the United
States to QIBs in reliance on an exemption from registration
under the U.S. Securities Act provided by, and in accordance
with the restrictions of, Rule 144A or another exemption
from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act or (b) outside the
United States in offshore transactions in accordance with
Regulation S, for subscription or purchase (as the case may
be) at the Offer Price, in each case on and subject to the terms
and conditions of the International Underwriting Agreement,
as further described in “Structure of the Global Offering”

— 23 —
DEFINITIONS

“International Underwriters” the underwriters named in the International Underwriting


Agreement, being the underwriters of the International
Offering

“International Underwriting the underwriting agreement relating to the International


Agreement” Offering to be entered into between the Company, the Joint
Global Coordinators and the International Underwriters on or
about the Price Determination Date, as further described in
“Underwriting”

“iyunbao” iyunbao.com (i雲保), an online insurance platform operated


by Shanghai Leopard Cloud Network Information Service
Co., Ltd. (上海豹雲網絡信息服務有限公司), a company
incorporated in the PRC

“JD.com” JD.com Inc., a company incorporated in the Cayman Islands


and listed on the Nasdaq Global Select Market (NASDAQ:
JD)

“Joint Bookrunners” J.P. Morgan Securities (Asia Pacific) Limited, Credit Suisse
(Hong Kong) Limited, UBS AG Hong Kong Branch, CMB
International Capital Limited, China International Capital
Corporation Hong Kong Securities Limited, Ping An of China
Securities (Hong Kong) Company Limited, Morgan Stanley
Asia Limited, ICBC International Capital Limited, BOCI Asia
Limited, ABCI Capital Limited, in relation to the Hong Kong
Public Offering; J.P. Morgan Securities plc, Credit Suisse
(Hong Kong) Limited, UBS AG Hong Kong Branch, CMB
International Capital Limited, China International Capital
Corporation Hong Kong Securities Limited, Ping An of China
Securities (Hong Kong) Company Limited, Morgan Stanley &
Co. International plc, ICBC International Capital Limited,
BOCI Asia Limited, ABCI Capital Limited in relation to the
International Offering

“Joint Global Coordinators” J.P. Morgan Securities (Asia Pacific) Limited, Credit Suisse
(Hong Kong) Limited, UBS AG Hong Kong Branch, CMB
International Capital Limited

— 24 —
DEFINITIONS

“Joint Lead Managers” J.P. Morgan Securities (Asia Pacific) Limited, Credit Suisse
(Hong Kong) Limited, UBS AG Hong Kong Branch, CMB
International Capital Limited, China International Capital
Corporation Hong Kong Securities Limited, Ping An of China
Securities (Hong Kong) Company Limited, Morgan Stanley
Asia Limited, ICBC International Securities Limited, BOCI
Asia Limited, ABCI Securities Company Limited, Head &
Shoulders Securities Limited, Futu Securities International
(Hong Kong) Limited, Essence International Securities (Hong
Kong) Limited in relation to the Hong Kong Public Offering;
J.P. Morgan Securities plc, Credit Suisse (Hong Kong)
Limited, UBS AG Hong Kong Branch, CMB International
Capital Limited, China International Capital Corporation
Hong Kong Securities Limited, Ping An of China Securities
(Hong Kong) Company Limited, Morgan Stanley & Co.
International plc, ICBC International Securities Limited,
BOCI Asia Limited, ABCI Securities Company Limited, Head
& Shoulders Securities Limited, Futu Securities International
(Hong Kong) Limited, Essence International Securities (Hong
Kong) Limited in relation to the International Offering

“Joint Sponsors” J.P. Morgan Securities (Far East) Limited, Credit Suisse
(Hong Kong) Limited, UBS Securities Hong Kong Limited,
CMB International Capital Limited

“Latest Practicable Date” September 8, 2017, being the latest practicable date for the
purpose of ascertaining certain information contained in this
prospectus prior to its publication

“Leshang” Hangzhou Leshang Internet Technology Co., Ltd.


(杭州樂尚網絡科技有限公司), a company incorporated in the
PRC

“Listing” the listing of the H Shares on the Main Board of the Hong
Kong Stock Exchange

“Listing Committee” the listing committee of the Hong Kong Stock Exchange

“Listing Date” the date, expected to be on or about September 28, 2017, on


which the H Shares are first listed and from which dealings in
the H Shares are permitted to take place on the Main Board of
the Hong Kong Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended or
supplemented from time to time

— 25 —
DEFINITIONS

“Locket” Hangzhou LOCKet Technology Co., Ltd. (杭州臻至科技有限


公司), a company incorporated in the PRC

“Mandatory Provisions” the Mandatory Provisions for Articles of Association of


Companies to be Listed Overseas (到境外上市公司章程必備
條款), for inclusion in the articles of association of companies
incorporated in the PRC to be listed overseas, promulgated by
the former State Council Securities Committee and other PRC
Government departments on 27 August 1994, as amended,
supplemented or otherwise modified from time to time

“Maximum Offer Price” HK$59.70 per H Share, being the maximum subscription price
in the Offer Price Range

“Mi Band” Huami (Beijing) Information Technology Co., Ltd. (華米(北


京)信息科技有限公司), a company incorporated in the PRC

“Mime Financial” Shanghai Mime Financial Information Service Co., Ltd.


(上海米么金融信息服務有限公司), a company incorporated
in the PRC

“Minimum Offer Price” HK$53.70 per H Share, being the minimum subscription price
in the Offer Price Range

“MOF” the Ministry of Finance of the PRC (中華人民共和國財政部)

“MOFCOM” the Ministry of Commerce of the PRC (中華人民共和國商務


部)

“MOLR” the Ministry of Land and Resources of the PRC (中華人民共


和國國土資源部)

“NDRC” the National Development and Reform Commission of the


PRC (中華人民共和國國家發展和改革委員會)

“NPC” the National People’s Congress of the PRC (全國人民代表大


會)

“Offer Price” the final offer price per Offer Share (exclusive of brokerage
of 1.0%, SFC transaction levy of 0.0027% and Hong Kong
Stock Exchange trading fee of 0.005%) of not less than
HK$53.70 and expected to be not more than HK$59.70, such
price to be determined by agreement between the Joint Global
Coordinators (on behalf of the Underwriters) and the
Company on or before the Price Determination Date

“Offer Price Range” HK$53.70 to HK$59.70 per Offer Share

— 26 —
DEFINITIONS

“Offer Shares” the Hong Kong Offer Shares and the International Offer
Shares, together with, where relevant, any additional H
Shares which may be issued pursuant to any exercise of the
Over-allotment Option

“Oliver Wyman Report” an industry report commissioned by us and independently


prepared by Oliver Wyman in connection with the Global
Offering

“Omron” Omron Corporation, a company incorporated in Japan

“Over-allotment Option” the option expected to be granted by the Company under the
International Underwriting Agreement to the International
Underwriters, exercisable by the Joint Global Coordinators
(on behalf of the International Underwriters), pursuant to
which the Company may be required to issue up to an
additional 29,894,000 H Shares (representing not more than
approximately 15.00% of the number of Offer Shares initially
being offered under the Global Offering) at the Offer Price, to
cover over-allocations in the International Offering, if any, as
further described in “Structure of the Global Offering”

“PBOC” the People’s Bank of China (中國人民銀行)

“PBOC rate” the exchange rate for foreign exchange transactions set daily
by the PBOC based on the previous day’s interbank foreign
exchange rate in the PRC and with reference to prevailing
exchange rates on the world financial markets

“PICC” People’s Insurance Company of China (中國人民保險集團股


份有限公司), an insurance company incorporated in the PRC

“Ping An Asset Management” Ping An Asset Management Co., Ltd. (平安資產管理有限責任


公司), a company established in May 2005 in the PRC with a
registered capital of RMB 500 million and a subsidiary of
Ping An Insurance

“Ping An Group” Ping An Insurance and its subsidiaries

“Ping An Insurance” Ping An Insurance (Group) Co. of China, Ltd. (中國平安保險


(集團)股份有限公司), a joint stock limited company
incorporated in the PRC on March 21, 1988 listed on Main
Board of the Stock Exchange (SEHK: 02318) and the
Shanghai Stock Exchange (SSE: 601318), and one of our
substantial shareholders

— 27 —
DEFINITIONS

“Ping An P&C” Ping An Property and Casualty Insurance Company of China,


Ltd. (中國平安財產保險股份有限公司), a subsidiary of Ping
An Insurance

“PRC” or “China” the People’s Republic of China, but for the purposes of this
prospectus only, except where the context requires, references
in this prospectus to PRC or China exclude Hong Kong,
Macau and Taiwan

“PRC Company Law” the Company Law of the People’s Republic of China (中華人
民共和國公司法), as amended and adopted by the Standing
Committee of the Twelfth National People’s Congress on 28
December 2015 and effective on 1 March 2016, as amended,
supplemented and otherwise modified from time to time

“PRC EIT Law” the Enterprise Income Tax Law of the PRC (中華人民共和國
企業所得稅) adopted by the Tenth National People’s Congress
on 16 March 2007 and effective on 1 January 2008

“PRC GAAP” generally accepted accounting principles in the PRC

“PRC Government” or “State” the central government of the PRC, including all
governmental subdivisions (including provincial, municipal
and other regional or local government entities) and
instrumentalities or, where the context so requires, any of
them

“PRC Legal Advisor” Grandall Law Firm (Shanghai)

“Pre-IPO Investments” the agreement between our Company and the Pre-IPO
Investors, pursuant to which the Pre-IPO Investors paid in
RMB5,775,000,000 for the subscription of an aggregate of
240,625,000 Foreign Shares at a price of RMB24.00 per Share
completed on June 7, 2015

“Pre-IPO Investors” Morgan Stanley Asia Securities Products LLC, CICC


Securities (HK) Limited, CDH Avatar, L.P., Keywise ZA
Investment and Equine Forces Limited Partnership

“Price Determination Date” the date, expected to be on or about September 21, 2017, on
which the Offer Price will be determined and, in any event,
not later than September 22, 2017

— 28 —
DEFINITIONS

“Promoter(s)” Ant Financial, Tencent Computer System, Ping An Insurance,


Shenzhen Jia De Xin Investment Company Limited (深圳市加
德信投資有限公司), Unifront Holding Limited (優孚控股有
限公司), Cnhooray Internet Technology Co. Ltd. (深圳日訊網
絡科技股份有限公司), Shanghai Yuanqiang Investment
Company Limited (上海遠強投資有限公司), Beijing Ctrip
International Travel Agency Limited (北京攜程國際旅行社有
限公司) and Shenzhen Rixun Internet Co., Ltd. (深圳市日訊
互聯網有限公司)

“QIB” a qualified institutional buyer within the meaning of Rule


144A

“Regulation S” Regulation S under the U.S. Securities Act

“Relevant Persons” the Joint Global Coordinators, the Joint Bookrunners, the
Joint Sponsors, the Joint Lead Managers, the Underwriters,
any of their or the Company’s respective directors, officers or
representatives or any other person involved in the Global
Offering

“RMB” or “Renminbi” the lawful currency of the PRC

“Rule 144A” Rule 144A under the U.S. Securities Act

“SAFE” the State Administration of Foreign Exchange of the PRC (中


華人民共和國國家外滙管理局)

“SAIC” the State Administration of Industry and Commerce of the


PRC (中華人民共和國國家工商行政管理總局)

“SASAC” the State-owned Assets Supervision and Administration


Commission of the State Council of the PRC (中華人民共和
國國務院國有資產監督管理委員會)

“SAT” the State Administration of Taxation of the PRC (國家稅務總


局)

“SFC” the Securities and Futures Commission of Hong Kong

“SF Express” SF Holding Co., Ltd. (順豐控股股份有限公司), a delivery


service company incorporated in the PRC

“SFO” the Securities and Futures Ordinance (Chapter 571 of the


Laws of Hong Kong), as amended or supplemented from time
to time

— 29 —
DEFINITIONS

“Shanghai Blockchain Enterprise an alliance launched by ZhongAn Technology on November 2,


Development Promotion 2016 to explore the development of blockchain technology in
Alliance” commercial applications and promote the science
development and technology innovation

“Shares” the shares in the share capital of the Company, with a nominal
value of RMB1 each

“Shareholders” the holders of the Shares

“Sinolink Worldwide” Sinolink Worldwide Holdings Limited, a company


incorporated in Bermuda as an exempted company and listed
on the Main Board of the Stock Exchange (SEHK: 1168), and
our Connected Person

“Sinolink Group” Sinolink Worldwide and its subsidiaries

“Special Regulations” the Special Regulations of the State Council on the Overseas
Offering and Listing of Shares by Joint Stock Limited
Companies (國務院關於股份有限公司境外募集股份及上市的
特別規定), promulgated by the State Council on 4 August
1994, as amended, supplemented or otherwise modified from
time to time

“Stabilising Manager” UBS AG Hong Kong Branch (or any of its affiliates or any
person acting for it)

“State Council” the State Council of the PRC (中華人民共和國國務院)

“Supervisors” members of the Supervisory Committee of the Company and,


where the context so requires, any of them

“Supervisory Committee” the supervisory committee established pursuant to the PRC


Company Law, as described in “Directors, Supervisors and
Senior Management”

“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy- backs
issued by the SFC, as amended, supplemented or otherwise
modified from time to time

“Tencent” Tencent Holdings Limited, a company incorporated in the


Cayman Islands and listed on the Main Board of the Stock
Exchange (SEHK: 0700)

“Tencent Computer System” Shenzhen Tencent Computer Systems Company Limited (深圳
市騰訊計算機系統有限公司) is a limited liability company
incorporated in the PRC on November 11, 1998, one of our
substantial shareholders and a subsidiary of Tencent

— 30 —
DEFINITIONS

“Tencent Group” Tencent Holdings Limited and its subsidiaries

“TK.cn”, “Taikang insurance” Taikang Online Property and Casualty Insurance Co., Ltd. (泰
康在線財產保險股份有限公司), an online insurance company
incorporated in the PRC

“Tmall” Tmall.com (天貓), an online platform created by Alibaba

“Track Record Period” the three years and three months ended March 31, 2017

“Underwriters” the Hong Kong Underwriters and the International


Underwriters

“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International
Underwriting Agreement

“U.S.” or “United States” the United States of America, its territories and possessions,
any state of the United States and the District of Columbia

“U.S. Securities Act” the United States Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder

“US$”, “USD” or “U.S. dollars” United States dollars, the lawful currency of the United States

”Wangyixiaodai” Shanghai Wangyixiaodai Co., Ltd. (上海網易小額貸款有限公


司), a company incorporated in the PRC

“Wecash” Beijing Wecash Technology Co., Ltd. (北京閃銀奇異科技有


限公司), a company incorporated in the PRC

“We Doctor” We Doctor Group Ltd. (微醫集團有限公司), a company


incorporated in the PRC

“Weidian” Weidian (微店), a mobile e-commerce platform operated by


Beijing Koudai Fashion Technology Co., Ltd. (北京口袋時尚
科技有限公司)

“Xiaomi” Xiaomi Inc. (北京小米科技有限責任公司), a company


incorporated in the PRC

“Xiaoying” Shenzhen Yingzhongtong Financial Information Service Co.,


Ltd. (深圳市贏眾通金融信息服務股份有限公司), a company
incorporated in the PRC

“Xiaozhu.com” Xiaozhu.com (小豬短租網), an online platform for short-term


rentals operated by Beijing Kuaipao Information Technology
Co., Ltd. (北京快跑信息科技有限公司), a company
incorporated in the PRC

— 31 —
DEFINITIONS

“Yi An” Yi An Property and Casualty Insurance Co., Ltd. (易安財產保


險股份有限公司), an online insurance company incorporated
in the PRC

“Yingzhongtong” Yingzhongtongda (Tianjin) Commercial Factoring Co., Ltd.


(贏眾通達(天津)商業保理有限公司), a company incorporated
in the PRC and a subsidiary of Xiaoying

“Yifenqi” Guangzhou Yifenqi Internet Technology Co., Ltd. (廣州易分


期網絡科技有限公司), a company incorporated in the PRC

“Zhaocaibao” Shanghai Zhaocaibao Financial Information Service Co., Ltd.


(上海招財寶金融信息服務有限公司), a company incorporated in
the PRC

“ZhongAn Technology” ZhongAn Information and Technology Services Co., Ltd.


(眾安信息技術服務有限公司), a wholly-owned subsidiary of
our Company, incorporated in the PRC on July 7, 2016

“%” per cent

In this prospectus, (i) unless the context otherwise requires, the terms “associate”, “connected
person”, “connected transaction”, “subsidiary” and “substantial shareholder” shall have the
meanings given to such terms in the Listing Rules; and (ii) the English names of the PRC nationals,
enterprises, entities, departments, facilities, certificates, titles and the like are translations of their
Chinese names and are included for identification purposes only. In the event of inconsistency
between the Chinese names and their English translations, the Chinese names shall prevail.

Unless otherwise specified, all references to any holdings of H Shares following the completion
the Global Offering assume that the Over-allotment Option is not exercised.

Rounding

Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them.

Language

This prospectus is written in the English language and contains a Chinese translation for
information purposes only. Should there be any discrepancy between the English language of this
prospectus and the Chinese translation, the English language version of this prospectus shall prevail.
For ease of reference, the names of Chinese laws and regulations, governmental authorities,
institutions or other entities established in the PRC or the awards and certificates given in the PRC
have been included in this prospectus in both Chinese and English languages and in the event of any
inconsistency, the Chinese language version shall prevail.

— 32 —
GLOSSARY

This glossary contains explanations of certain terms used in this prospectus in connection
with the Company and its business. These terms and their meanings may not always correspond to
standard industry meaning or usage of these terms.

“admitted assets” assets that are not subject to restrictions on disposal and can
be used for performing payment obligations to policyholders

“admitted liabilities” liabilities that need to be repaid whether during continuing


operation or during liquidation of an insurance company, and
capital instruments in excess of regulatory limits

“annuity” a savings product where the accumulated amount can be paid


out to the customer in a variety of income streams

“application programming a set of clearly defined methods of communication between


interface” or “API” various software components

“artificial intelligence” intelligence exhibited by machines in the area of computer


science that emphasizes the creation of intelligent machines
that work and react like humans or other natural intelligence

“big data analytics” the use of advanced analytic techniques against very large,
diverse data sets to uncover hidden patterns, unknown
correlations, market trends, customer preferences and other
useful information that can help organizations make
more-informed business decisions

“blockchain technology” a decentralized and distributed digital ledger that is used to


record transactions across many computers so that the record
cannot be altered retroactively without the alteration of all
subsequent blocks and the collusion of the network, allowing
participants to verify and audit transactions inexpensively

“cede” the transfer of all or part of a risk written by an insurer to a


reinsurer

“claim” an occurrence that is the basis for submission and/or payment


of a benefit under an insurance policy. Depending on the
terms of the insurance policy, a claim may be covered, limited
or excluded from coverage

“cloud-based” applications, services or resources made available to users on


demand via the Internet from a cloud computing provider’s
servers with access to shared pools of configurable resources

— 33 —
GLOSSARY

“combined ratio” the sum of the loss ratio and the expense ratio. A combined
ratio below 100% generally indicates underwriting profit. A
combined ratio over 100% generally indicates underwriting
loss

“commission” a fee paid to an agent or broker by an insurance company for


services rendered in connection with the sale or maintenance
of an insurance product

“credit risk” the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an
obligation

“currency risk” the risk that asset or liability values, cash flows, income or
expenses will be affected by changes in exchange rates

“customer” the insured under our insurance policies, including customers


who choose to purchase our products, as well as customers
who are allocated with our products by our ecosystem
partners. Some of our ecosystem partners are also our direct
customers when they purchase our insurance products. The
number of our customers was calculated based on unique
identifiers and contact information available to us

“DevOps platform” a software development and delivery process that emphasizes


communication and collaboration among product
management, software development and operations

“Double 11 Shopping Festival” the online shopping promotion event in the PRC on November
11

“embedded page component” integrated insurance business logic by utilizing H5 page


encapsulation, which allows external merchants and partners
to access and use through the link and specific parameters and
can be embedded in mobile pages and used in applications

“EMR” Electronic Medical Record, an electronic record of


health-related information on an individual that can be
created, gathered, managed, and consulted by authorized
clinicians and staff within one health care organization

“expense ratio” insurance operating expenses as a percentage of net premiums


earned in the relevant period

“machine learning” the subfield of computer science of getting computers to act


without being explicitly programmed

“GDP” gross domestic product

— 34 —
GLOSSARY

“graph mining” the extraction of patterns (sub-graphs) of interest from graphs

“GWP” or “gross written total premiums (whether or not earned) for insurance
premiums” contracts written or assumed during a specific period, without
deduction for premiums ceded

“handling charges and fees paid to insurance agents for the distribution of our
commissions” policies

“insurance agents” including all agents and brokerage companies that are
licensed to sell insurance products

“insurance operating expenses” expenses incurred by the daily operations of our insurance
underwriting business, which equal handling charges and
commissions, and other operating and administrative
expenses less non-insurance related operating expenses

“insured” the insured person as specified in the insurance product

“insured amount” the maximum amount of sum which an insurer agrees to


underwrite under an insurance product

“Insuretech” use of technology innovations designed to achieve savings


and efficiency from the traditional insurance industry model

“incurred but not reported reserves for insurance incidents incurred and claims which
reserves” or “IBNR reserves” have not been reported to primary insurance companies or
reinsurance companies, or reserves provided for insufficient
claim reserves in respect of incurred and reported claims

“investment funds” pool of funds held for collective investment purposes

“investment products” products held by an asset management company engaged by


us to earn investment gains

“isomorphic and heterogeneous in the world of blockchains, the difference between


blockchains” isomorphism and heterogeneity is whether to support Turing’s
complete smart contract

“loss ratio” net claims incurred as a percentage of net premiums earned

“Micro-service architecture” an architectural style that structures an application as a


collection of loosely coupled services, which implement
business capabilities

“morbidity” incidence rates and duration of disability, varying by such


parameters as age, gender and period since disability, used in
pricing and computing liabilities for accident and health
insurance

— 35 —
GLOSSARY

“net investment income” the sum of interest income, dividend income and realized
gains or losses on securities through profit or loss and
available-for-sale securities

“net investment yield” the sum of interest income and dividend income less interest
expense relating to securities sold under agreements to
repurchase for the period as a percentage of the average of the
opening and closing balances of total investment assets of the
period (in the case of 2015 and 2016 and the three months
ended March 31, 2016 and 2017) or the closing balance of
total investment assets of the period (in the case of 2014)

“net premiums earned” net written premiums less net change in unearned premium
reserves during a period

“net written premiums” gross written premiums for a given period less premiums
ceded to reinsurance companies during such period

“online insurance company” companies permitted by PRC law and relevant regulations to
operate internet insurance business. As of the Latest
Practicable Date, there were four licensed online insurance
companies in China

“operating margin” operating margin measures the operating profitability of our


business relative to the turnover of the business we generate

“penetration rate” insurance premiums as a percentage of GDP

“policy fees” charge to the policyholder collected in addition to the


premiums to cover the costs of policy administration and
certain other costs

“premium” payment and consideration received on insurance policies


issued or reissued by an insurance company

“product terms” policy terms filed and registered with the CIRC

”proprietary platforms” including Zhong An’s websites, Zhong An’s mobile


application, Zhong An’s WeChat public accounts, Zhong An’s
QQ public account and Zhong An’s Tmall flagship store

“reinsurance” the practice whereby a reinsurer, in consideration of a


premiums paid to it, agrees to indemnify another party for
part or all of the liabilities assumed by the reinsured party
under an insurance contract, which the reinsured party has
issued

— 36 —
GLOSSARY

“research and development staff costs, excluding share-based compensation, for our
investments” personnel under information and technology department,
application development department, data management
department, demand planning department, system test
departments and ZhongAn Technology, including capitalized
development related staff cost

“reserves” liability established to provide for future payments of claims


and benefits to policyholders net of liability ceded to
reinsurance companies

“solvency” the ability of an insurance company to satisfy its policyholder


benefits and claims obligations

“solvency margin ratio” a measure of an insurance company’s solvency

“total investment assets” the sum of cash and short-term time deposits,
available-for-sale financial assets, financial assets at fair
value through profit or loss, securities purchased under
agreements to resell, investments classified as loans and
receivables and restricted statutory deposits, net of securities
sold under agreements to repurchase after deducting the
portion held for investment-linked insurance policyholders

“total investment income” the sum of net investment income and net fair value gains
through profit or loss, less interest expense relating to
securities sold under agreements to repurchase

“total investment yield” total investment income for the period as a percentage of the
average of the opening and closing balances of total
investment assets of the period (in the case of 2015 and 2016
and the three months ended March 31, 2016 and 2017) or the
closing balance of total investment assets at the end of the
period (in the case of 2014)

“underwriting” the process of examining, accepting or rejecting insurance


risks, and classifying those accepted, in order to charge an
appropriate premium for each accepted risk

“underwriting profit” or net premiums earned less net claims incurred and insurance
“underwriting loss” operating expenses

“unearned premium reserves” portions of written premiums relating to unexpired risk of


insurance coverage

— 37 —
FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are, by their nature, subject to
significant risks and uncertainties. These forward-looking statements include, but are not limited to,
statements relating to:

• our business and operating strategies and our measures and actions to implement these
strategies;

• our ability to maintain and enhance our market position;

• the future competitive environment of the PRC or global online insurance and Insuretech
industries;

• our insurance policy;

• any capital expenditure plans;

• our operational and business prospects, including development plans for our existing and
new businesses, insurance products, services and solutions;

• changes in the regulatory environment of the PRC or global online insurance and Insuretech
industries, including the latest developments in the laws, rules and regulations applicable
to us;

• general economic conditions; and

• general industry outlook and future developments in the PRC or global online insurance and
Insuretech industries.

The words “aim,” “anticipate,” “endeavour,” “believe,” “could,” “estimate,” “proposed,”


“expect,” “going forward,” “intend,” “may,” “plan,” “seek,” “will,” “would” and similar expressions,
as they relate to us, are intended to identify forward-looking statements. These forward-looking
statements reflect our current views with respect to future events and do not guarantee any future
performance. Actual results may differ materially from information, implied or expressed, in the
forward-looking statements as a result of a number of factors, including, but not limited to, the risk
factors set forth in the section headed “Risk Factors” and the following:

• any changes in the laws, rules and regulations of the central and local governments in the
PRC and the rules, regulations and policies of the CIRC and other relevant government
authorities relating to any aspects of our business operations, and the implications of such
changes for our business, results of operations, financial condition and prospects;

• general economic, market and business conditions in the PRC, including the sustainability
of the economic growth and the conditions of the capital markets in the PRC;

• changes or volatility in interest rates, foreign exchange rates, equity prices or other rates
or prices;

— 38 —
FORWARD-LOOKING STATEMENTS

• the effect of competition in the PRC online insurance and Insuretech industries on the
demand for and the prices of our products and solutions;

• business opportunities and expansion that we may pursue;

• changes in population growth and other demographic trends, including mortality, morbidity
and longevity rates, in the PRC;

• termination of or changes in the cooperation relationships with our ecosystem partners and
third-party service providers;

• our ability to identify, measure, monitor and control risks in our business;

• our ability to price our products and solutions properly and establish reserves for future
policy benefits and claims;

• our ability to maintain our credit ratings; and

• other factors beyond our control.

Forward-looking statements involve inherent risks, uncertainties and assumptions and speak only
as at the date on which they are made. As a result of these and other risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this prospectus might not
occur in the way we expect or at all. Accordingly, you should not place undue reliance on any
forward-looking information. All forward-looking statements contained in this prospectus are
qualified by reference to the cautionary statements set forth in this section. We do not intend to update
or otherwise revise the forward-looking statements in this prospectus, whether as a result of any new
information or future events or otherwise.

— 39 —
RISK FACTORS

RISKS RELATING TO OUR BUSINESS

We incurred a net underwriting loss throughout the Track Record Period and a net loss in
the first quarter of 2017. We expect to incur a significant loss in 2017, and we may continue
to experience losses in the future.

Our combined ratio was 123.1% in the three months ended March 31, 2017, compared to 112.3%
in the same period of 2016. We expect to incur a significant net loss in 2017. In 2014, 2015 and 2016,
we recorded an underwriting loss of RMB61.5 million, RMB511.6 million and RMB153.1 million,
respectively, and our combined ratio was 108.6%, 126.6% and 104.7%, respectively. A combined ratio
below 100% generally indicates underwriting profit, whereas a combined ratio over 100% generally
indicates underwriting loss. We incurred a net loss of RMB202.1 million in the three months ended
March 31, 2017. We cannot assure you that we will be able to generate net profits or positive cash flow
from operating activities in the future. As a result of our rapid expansion, deepened cooperation with
ecosystem partners and continued focus on certain insurance products with relatively higher rates of
handling charges and commissions or technical service fees, our insurance operating expenses
increased significantly in the three months ended March 31, 2017 and outpaced the increase of our
GWP. As a result, our underwriting loss increased from RMB69.8 million in the three months ended
March 31, 2016 to RMB205.5 million in the three months ended March 31, 2017.

Our ability to achieve and retain profitability depends in large part on our ability to manage
combined ratio as we continue to develop our business. We strive to leverage the operating data
accumulated and improve our pricing and risk management capabilities to further drive down our loss
ratio. We also expect to optimize our product mix and expand cooperation with smaller, more
specialized or offline ecosystem partners to improve our expense ratio. However, the success of these
efforts depends on many factors, some of which, such as our relationship with ecosystem partners,
competitive landscape, market acceptance of our products, etc., are not entirely within our control. In
addition, we are in an early stage of development and currently focusing on expanding our operations
at scale by connecting with more ecosystem partners and launching more products to reach more
customers, which would entail substantial expenses. Therefore, we may continue to experience losses
in the future.

We are in the early stage of development with limited operating history in an emerging,
dynamic and competitive industry, and we cannot guarantee that our current or future
strategies will be successfully implemented or that we will continue to grow or generate
profit.

We have a limited operating history in the emerging, dynamic and competitive Insuretech market
in China. We launched our first product in November 2013. Our relatively short operating history,
together with the emerging, dynamic and competitive features of the Insuretech industry, makes it
difficult to assess our future prospects or forecast our future results. In addition, some of our insurance
products have a short operating history and their past profitability may not be indicative of their future
profitability and can be also affected by the cooperation model with our ecosystem partners.

— 40 —
RISK FACTORS

As our business develops and in response to competition, we may continue to introduce new
products, improve our existing products, or adjust and optimize our business model. In connection
with the introduction of new products or in response to general economic conditions, we may impose
a more stringent credit management and risk control policy and/or system to ensure the quality of our
insurance products and solutions, which may negatively affect the growth of our business. Any
significant change to our business model may not achieve expected results and may have a material
and adverse impact on our financial condition and results of operations. It is therefore difficult to
effectively assess our future prospects. The risks and challenges we encounter or may encounter in this
emerging, dynamic and competitive market may have impacts on our business and prospects. These
risks and challenges include our ability to, among other things:

• develop and maintain relationships with our existing business partners and attract new
business partners;

• enhance and maintain the value of our brand;

• navigate an evolving regulatory environment;

• develop and launch diversified and distinguishable products to effectively address the
needs of our customers and ecosystem partners;

• grow our customer base and enhance our customer engagement in a cost-efficient manner;

• develop or implement additional strategic initiatives to further increase monetization;

• enhance our credit management and risk control capabilities;

• maintain a reliable, secure, high-performance and scalable technology infrastructure;

• maintain our innovative corporate culture and continue to attract, retain and motivate
talented employees;

• generate reasonable returns on our investments or realize synergies by investing in potential


strategic targets; and

• defend ourselves against litigation, regulatory interference, claims concerning intellectual


property, privacy or other aspects of our business.

The industries in which we operate are generally new and highly dynamic, and may not develop
as expected. If we fail to educate business partners and customers about the value of our platform and
services, if the market for our products and solutions does not develop as we expect, if we fail to
address the needs of our target market, or face other risks and challenges, our business and results of
operations will be harmed.

— 41 —
RISK FACTORS

Our business growth and profitability in recent periods may not be indicative of future
performance. You should not rely on the results of recent periods as an indication of future
revenue, profit or growth.

Although we have experienced significantly growth since our inception in 2013, we may not
experience similar growth in future periods. Accordingly, you should not rely on the results of any
prior quarterly or annual periods as indicative of our future GWP or net profit growth or financial
results. In future periods, our GWP could grow more slowly than we expect or even decline. We
incurred a net loss of RMB202.1 million in the three months ended March 31, 2017 and we expect to
incur a net loss in 2017. We may continue to incur losses in the future for a number of reasons,
including other risks described in this prospectus, and we may encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors.

We derived and expect to continue to derive a significant majority of our total income from the
sale of our ecosystem-oriented insurance products, which are in a competitive industry. In addition,
our recent profitability may not be indicative of future profitability. Our combined ratio was above
100% during each of the three years from 2014 to 2016 and the three months ended March 31, 2017.
As we continue to expand and deepen our cooperation with ecosystem partners, we expect our
operating and administrative expenses, in particular, consulting fees and service charges and handling
charges and commissions, to increase significantly and outpace the growth of our net premiums earned
as we continue to rely on partnerships with our shareholders and other ecosystem partners. See “—
We historically derived a majority of our total income through partnering with our shareholders and
related parties, and the synergy value and cross-selling effect from these partnerships may decrease
in the future.” “Some of our shareholders and related parties offer products competing with ours” and
“— We depend on our cooperation with our ecosystem partners and other participants in the
ecosystems. Our business may be affected if such partners do not continue to maintain their
relationship with us or by the operational failure of third-party ecosystem partners” in this section. As
a result, we may incur net losses in the future.

We historically derived a majority of our total income through partnering with our
shareholders and related parties, and the synergy value and cross-selling effect from these
partnerships may decrease in the future.

Our shareholders, in particular Ant Financial and Ping An Insurance, are amongst our most
important ecosystem partners. Please refer to “Relationship with Connected Persons — Summary of
Our Connected Persons” for details of connected persons who were our ecosystem partners or top five
customers during the Track Record Period. We would not be able to achieve our rapid growth without
the support and resources provided by our shareholders. We cannot assure you that our agreements
with our shareholders will be renewed or renewed on acceptable terms upon their expiration, and we
cannot assure you that we will be able to benefit from the cooperation from our shareholders.

We rely on the systems and platforms of our shareholders and related parties to uncover and
address different consumer needs. For example, our idea to develop Shipping Return Policy, the
product that has brought the most sizable sales, arose from the need to protect the consumers from the
risk of having to return purchased goods on Taobao Marketplace. To implement it, we embedded the
Shipping Return Policy into the order system of Taobao Marketplace.

— 42 —
RISK FACTORS

A number of our largest ecosystem partners, including Taobao Marketplace, Jiyoujia (極有家),
Juhuasuan (聚划算) and and Tmall (天貓), are owned or operated by Alibaba. Alibaba works with Ant
Financial Group to select companies to provide insurance solutions that can best serve consumer needs
arising from their respective platforms. Ant Financial Group provides technology and consulting
services to us, which facilitate the integration of our solutions into the platforms of Alibaba and its
subsidiaries. With respect to our cooperation with the platforms of Alibaba and its subsidiaries, we
have entered into various agreements with Ant Financial Group. However, we do not have direct
contractual relationships with Alibaba or its subsidiaries. In the event that Ant Financial Group is
unable to facilitate the integration of our solutions into the platforms of Alibaba and its subsidiaries,
our business and results of operations may be materially and adversely affected.

Some of our shareholders and related parties offer products competing with ours.

The cooperative arrangements with our shareholders or related parties are not exclusive and more
players are entering into the market to engage in similar business as ours. Whether our insurance
solutions are ultimately selected over our competitors’ is determined by these ecosystem partners,
which may not necessarily favor us. Some of our shareholders and related parties also offer products
competing with ours. For example, Ping An Group offers short-term health insurance products that are
similar to our Personal Clinic Policy. Cathay, a subsidiary of Ant Financial, offers shipping return
insurance on the platforms of Alibaba, Ant Financial and their subsidiaries. Internet conglomerates in
China, particularly Alibaba and Tencent, have strong technological capabilities, and may
independently develop more products competing with ours in the future. If competition between us and
our shareholders and related parties becomes more intense in the future, our business and results of
operations may be materially and adversely affected.

We may not be able to effectively manage our growth, control our expenses or implement our
business strategies, in which case we may be unable to maintain high-quality services or
adequately address competitive challenges, and our business and results of operations may be
materially and adversely affected.

We have experienced rapid growth, particularly in our customer base and GWP, in recent years.
We provided services to 199.1 million, 312.9 million, 344.8 million and 238.2 million customers in
2014, 2015 and 2016 and in the first quarter of 2017, respectively. Our GWP grew from RMB794.1
million in 2014, to RMB2,283.0 million in 2015, and further to RMB3,408.0 million in 2016, and from
RMB604.4 million in the first quarter of 2016 to RMB1,030.4 million in the first quarter of 2017.
However, we may not be able to grow at the same rate in the future if we cannot maintain the growth
of our customer base or implement our business strategies. Our success will depend in part on our
ability to manage our growth effectively and deal effectively with any and all issues that may
potentially hinder our growth. As our operations grow in scale, scope and complexity, we will need
to improve and upgrade our systems and infrastructure, which will require significant expenditures
and allocation of valuable management resources. If we fail to maintain the necessary level of
discipline or fail to allocate limited resources effectively in our organization as it grows, our business,
operating results and financial condition will suffer.

— 43 —
RISK FACTORS

To effectively manage our growth, we will need to implement a variety of new and upgraded
operational, technological and financial systems, procedures and controls, including the improvement
of our accounting, actuarial, claims and other internal management systems and the enhancement of
our compliance and risk control capabilities. The expansion of our customer base and the rapid
increase in GWP may subject us to greater exposure to insurance risks, and the premiums we collect
may not be sufficient to cover insurance operating expenses. Such expansion may also increase our
exposure to liquidity risk, credit risk and operational risk.

We expect that we will need to continue to devote substantial financial, operational and technical
resources to managing our growth and implementing our business strategies. In order to attain and
maintain profitability, we will need to recruit, develop and retain skilled and experienced personnel
who can demonstrate our value proposition to customers and ecosystem partners. Continued growth
could also strain our ability to maintain reliable customer services, effectively monetize our services,
and improve our operations. Furthermore, the addition of new employees and the upgrading of systems
will increase our cost.

We depend on our cooperation with our ecosystem partners and other participants in the
ecosystems. Our business may be affected if such partners do not continue to maintain their
relationship with us or by the operational failure of third-party ecosystem partners.

We rely on our ecosystem partners in China to offer innovative insurance products to customers
through scenario-based settings. In each of our ecosystem, and for each of our key product category,
we rely on a few ecosystem partners to generate a significant portion of our GWP. In 2014, 2015, 2016
and the first quarter of 2017, GWP generated from or through platforms of our ecosystem partners
accounted for 100.0%, 97.7%, 86.2% and 74.6% of our GWP in the respective period and GWP
generated from or through the platforms of our top five ecosystem partner groups (in terms of GWP
contribution) accounted for 98.9%, 95.3%, 80.8% and 66.4% of our GWP in the respective period.
Some of our ecosystem partners, for example Alipay and SF Express, were also our top policyholders
during the Track Record Period. See “Business — Our Customers and Customer Services — Our
Customers.” We have established partnership with China’s leading e-commerce platforms, such as
Taobao Marketplace and Tmall, major online travel platforms, including the top four online travel
agencies in China, namely Ctrip.com, Qunar.com, Alitrip.com and Tongcheng.com, medical device
manufacturers such as Omron, online healthcare platforms such as We Doctor. We cooperate with Ping
An Insurance for Baobiao Auto Insurance. Our extensive customer data originates from our large and
expanding customer base, most of which comes from our ecosystem partners. Certain of our ecosystem
partners allocate insurance products provided by different insurance companies based on their
platform rules and may not necessarily favor us. For example, Ctrip allocates flight delay or accident
insurance products to its customers from various providers, including us, based on the fee proposals
and service capabilities of the insurance providers, and the competition among providers could be
intense.

The partnerships with our ecosystem partners are not on an exclusive basis, and the terms of
certain cooperation agreements with the ecosystem partners are generally one to two years subject to
renewal. If our ecosystem partners change their cooperation policies, terminate their partnership or do
not renew the cooperation agreements with us, our business and result of operations may be materially
and adversely affected. If we are not able to attract new ecosystem partners, retain our existing

— 44 —
RISK FACTORS

ecosystem partners or renew our existing contracts with major ecosystem partners on terms favourable
to us, we may not be able to increase our customer base, which will hinder our business growth.
Additionally, we may rely on our ecosystem partners to drive the growth of our customer base, and
we may incur significant customer acquisition costs in the future if our existing ecosystem partners
experience loss in traffic, or charge a higher fee rate. Furthermore, with respect to our consumer
finance business, we have relied on, and may continue to rely on, our ecosystem partners such as
Xiaoying and its subsidiaries for debt recovery and collection, and our loss ratio, which is net of
recovery, may increase significantly in future if our ecosystem partners fail to continue to provide
such assistance in debt recovery and collection. See “—We are subject to credit cycle and the risk of
deterioration of credit profiles of borrowers and the risks associated with debt recovery and collection
for our consumer finance ecosystem, the occurrence of which will adversely affect our results of
operation and financial condition.” The occurrence of any of these circumstances may significantly
hinder our ability to increase our customer base and may significantly increase our expense and thus
our business, results of operations, financial condition and prospects might be materially and
adversely affected.

In addition, we generate a significant portion of our GWP from a limited number of


policyholders. For example, for each of the years ended December 31, 2014, 2015 and 2016 and for
the three months ended March 31, 2016 and 2017, our top five policyholders combined accounted for
approximately 9.4%, 9.9%, 6.4%, 9.8% and 7.4% of our GWP, respectively. For the three months
ended March 31, 2017, our top five policyholders each accounted for 2.2%, 1.9%, 1.8%, 0.9% and
0.5% of our GWP, respectively. Failure to retain these policyholders may have a material adverse
effect on our business and results of operations.

Our business model may be replicated quickly by other internet companies as well as
traditional insurance companies and other financial institutions aiming to engage in
Insuretech business.

The leading Chinese internet companies have experienced the fast-moving internet development
in China in past decades and have demonstrated their strong capacities in customer-centric and
efficiency-driven business development and innovation. We are operating in an emerging industry, and
we may be exposed to unprecedented uncertainties and risks. As such, companies intending to enter
the market may be able to learn from the lessons and experiences we have accumulated from our
operations. These companies also may have more resources to enter into the Insuretech industry. Given
the large amount of data and strong capacity of technological development the leading Chinese
internet companies have, we believe it is possible that the cycle of business development and growth
of those internet companies might be much shorter than ours. In addition, we have seen certain
traditional insurance companies and other financial institutions enter the Insuretech market in order
to take advantage of the soaring opportunities emerged from online ecosystems. Considering these
internet companies’ strong abilities in capturing customer data and promoting their products through
their existing abundant online channels and the potential of traditional insurance companies and
financial corporations to convert their offline resources and customers online, we may face severe
competition in the near future from these potential competitors.

— 45 —
RISK FACTORS

If we do not meet solvency margin ratio requirements, we could be subject to regulatory


actions and could be forced to change our business strategies or slow down our growth.

We are required by CIRC regulations to maintain solvency margin ratios commensurate with our
business and risk exposures. We are required to meet the relevant solvency margin ratio requirements,
failing to do so could cause CIRC to impose a range of limitations on our insurance business
operations and investment activities. For example, insurance companies with solvency margin ratios
of less than 100% may be subject to limitations in relation to, among others, the establishment of new
branches, distribution of dividends and investments in unsecured corporate bonds, infrastructural debt
investment plans, unlisted equity securities, real estate, overseas investments, business scope,
compensation of directors and supervisors, commercial advertisement and change of responsible
persons and management of the Company. For additional information, see “Regulatory Overview —
Solvency Management — Solvency Management of Insurance Company.” Under the older solvency
system, our solvency margin ratio was 714.9% and 1,620.4% as of December 31, 2014 and 2015,
respectively. Under the China Risk Oriented Solvency System (C-ROSS), which took effect in 2016,
our comprehensive solvency margin ratio was 722.5% and 638.3% as of December 31, 2016 and March
31, 2017, respectively.

The solvency margin ratios are affected by a number of factors, such as the amount of capital,
the level of reserves we are required to maintain, the profit margin of our products, returns on our
investments, underwriting and acquisition costs, policyholder and shareholder dividends and business
growth, and the solvency margin ratios fluctuate frequently. Many factors can cause the solvency
margin ratios to fall below the level required by the CIRC. If our financial performance or business
results deteriorate, our business grows too rapidly and causes significant decline in solvency margin
ratios, the CIRC may require us to make a rectification or otherwise impose more stringent solvency
margin ratio requirements in the future, or for other reasons if we cannot comply with the CIRC’s
solvency margin ratio requirements, we may need to raise additional capital in order to support our
business and operations. Our ability to obtain additional capital from external sources in the future is
subject to a variety of uncertainties, including, among others, our future financial condition, results
of operations and cash flows. We may not be able to obtain additional capital in a timely manner or
on acceptable terms or at all. Therefore, we cannot assure you that we will always be able to achieve
the minimum solvency margin ratios required by the CIRC on an ongoing basis. If we fail to maintain
the required solvency margin ratios, the CIRC may impose regulatory limitations on us, including,
among other things, (i) order us to increase capital or restrict our distribution of dividends to
shareholders; (ii) limit the compensation and spending of directors and senior management officers;
(iii) impose restrictions on commercial advertising; (iv) restrict the establishment of new branches,
limit our business scope, or order us to cease operating new business and to transfer our insurance
business or cede our business; (v) order an auction of our assets or restrict our purchases of fixed
assets; (vi) restrict the channels for deployment of our insurance funds; (vii) change the controller and
relevant management; and (viii) put us into receivership. See “Regulatory Overview — Solvency
Management — Solvency Management of Insurance Company.” Some or all of these limitations could
constrain our underwriting capacity, lower our growth rate and have a material adverse effect on our
business, results of operations and financial condition.

— 46 —
RISK FACTORS

Differences in actual benefits and claims from the assumptions used in pricing and charging
reserves for our insurance products may materially and adversely affect our results of
operations and financial condition.

Our financial results from our operations depend to a significant extent on the level of
consistency between actual benefits and claims we pay out and the assumptions and estimates we use
when setting the prices for our insurance products.

Our product pricing is based on assumptions and estimates that we derive from, among other
things, our historical operating data, data collected from our ecosystem partners and third-party data
providers, industry data, historical and current market conditions and the relevant CIRC regulations.
In addition, given that our operating period in the industry is relatively short during which we
collected and accumulated our data, we are only able to verify the reliability of our data during such
limited operating period, and our data analytics capabilities may be limited. As a large portion of our
products are innovative, we may lack sufficient historical data to conduct accurate pricing and risk
management. Furthermore, if the actual circumstances are not consistent with the data we collect,
based on which we formulate our product pricing, or if our actual investment performance is worse
than the underlying assumptions, our profitability may be materially and adversely affected, which
may in turn have a material adverse effect on our business, results of operations and financial
condition.

We are subject to credit cycle and the risk of deterioration of credit profiles of borrowers
and the risks associated with debt recovery and collection for our consumer finance
ecosystem, the occurrence of which will adversely affect our results of operation and financial
condition.

Our credit guarantee insurance is subject to credit cycle associated with the volatility of general
economy. As economic conditions deteriorate, we face increased risk of default or delinquency of
borrowers in our consumer finance ecosystem, which will result in lower returns or losses. In the event
that the creditworthiness of our customers deteriorates or we cannot track the deterioration of their
creditworthiness, the credit criteria we use for the analysis of borrower credit profiles may be rendered
inaccurate, and our risk management system may be subsequently rendered ineffective and our risk
reserves may become insufficient to cover losses, albeit we believe they were adequately made based
on our historical results. This in turn may lead to higher default rates and adverse impacts on our
reputation, business, results of operations and financial positions.

In addition, compared to traditional products offered by commercial banks with strict purchase
requirements and procedures, we sell our credit guarantee insurance online with simple, paperless and
highly transparent processes as well as relatively low premiums. Thus, our credit guarantee products
have attracted an increasing number of young borrowers that are active users of e-commerce business
and have strong needs for small credit to finance their online purchases. This trend in turn may reduce
the general creditworthiness of borrowers in our consumer finance ecosystem and increase the default
rates of our products in our consumer finance ecosystem because young borrowers tend to have less
experience in managing finance and do not have stable income.

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RISK FACTORS

Moreover, our financial condition and results of operations depend on our ability to recover
losses associated with credit guarantee insurance. Our debt recovery and collection depend on a
variety of factors including borrower profiles, the effectiveness of our credit risk management, and the
cooperation with and assistance from our ecosystem partners such as Xiaoying and its subsidiaries.
See “—We depend on our cooperation with our ecosystem partners and other participants in the
ecosystems. Our business may be affected if such partners do not continue to maintain their
relationship with us or by the operational failure of third-party ecosystem partners.” During the Track
Record Period, we were able to recover a majority of our losses for our credit guarantee insurance.
In the event that our ability to recover is impaired or lower than expected, our recovery rate and
insurance claims paid as a percentage of net written premiums would deteriorate and our financial
condition and results of operations will be negatively impacted. These factors beyond our control may
adversely affect our results of operations and financial positions or render our risk reserve insufficient
to cover losses. The total underlying assets with our credit guarantee insurance as of December 31,
2014, 2015 and 2016 and March 31, 2017 were RMB2.6 billion, RMB23.6 billion, RMB61.7 billion
and RMB54.2 billion, respectively.

We have relied on the cooperation with two major ecosystem partners, namely Zhaocaibao and
Xiaoying and its subsidiaries, for the growth of our consumer finance ecosystem. We provide credit
guarantee insurance to borrowers or investors on the platforms of Zhaocaibao and Xiaoying to
facilitate the borrowing or investment on these platforms. In addition, we cooperate with Xiaoying’s
subsidiaries, including certain asset management companies and a factoring company, to connect
consumer finance platforms with diversified funding sources. For example, Xiaoying’s affiliated asset
management companies and a factoring company acquire and sell asset packages to our financial
institution partners. We provide credit guarantee insurance for the consumer loans underlying these
asset packages. Approximately 67% and 22% of the underlying assets with our credit guarantee
insurance as of March 31, 2017 were from the policyholders from or through Zhaocaibao and
Xiaoying, respectively. Furthermore, GWP generated from or through Zhaocaibao and Xiaoying
accounted for approximately 13% and 21%, respectively, of GWP generated from the sale of our credit
guarantee insurance for the three months ended March 31, 2017. See “— We depend on our
cooperation with our ecosystem partners and other participants in the ecosystems. Our business may
be affected if such partners do not continue to maintain their relationship with us or by the operational
failure of third-party ecosystem partners”. In addition, if the business operation, credit assessment and
risk management of these platforms are not effective or our cooperation models with these platforms
change, we might incur significant bad debt and increase the loss ratio of our credit guarantee
insurance.

Our business may be negatively impacted if the credit or other information that we receive
from third parties about a borrower for our credit guarantee business and other related
information is inaccurate or may not accurately reflect the borrower’s creditworthiness.

For our credit guarantee business, in order to evaluate the creditworthiness of borrower for our
credit guarantee business and determine their credit levels, we obtain information on our customers
and certain information on risk profiles of the customers through required personal information
submitted by the borrowers themselves, information on their credit profiles from the PBOC credit
reference center as well as independent third-party data providers, such as Qian Hai Zheng Xin
(前海征信), Sesame Credit (芝麻信用), Lawxp.com, Tongdun and Bairong Financial. We accordingly

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RISK FACTORS

establish credit profiles for borrowers based on such credit information we collect, and we classify and
manage our borrowers based on their credit scores. However, as credit reporting systems for
individuals in China are in their early stages of development, there are limited public sources available
to verify the financial and credit information of individual consumer, and the systems may not be able
to reflect the real credit profiles of these borrowers constantly and accurately. Although we have
developed our credit management and risk control procedures and policies and have devoted efforts
to verifying the creditworthiness of these borrowers before we offer credit guarantee insurance, the
effectiveness of such credit management for our credit guarantee insurance is conditioned on the
accuracy and completeness of the customer information we obtain. We cannot guarantee the
completeness or accuracy of any information we obtain with respect to any particular customer. If the
data and information we rely on are inaccurate, obsolete, or otherwise not indicative of the
creditworthiness of the borrowers of our credit guarantee business, we are exposed to higher risks of
default, and we cannot achieve the operating margins as we anticipate. As a result, our business and
operations could be severely disrupted, which could materially and adversely affect our results of
operations and financial conditions.

The success and growth of our business rely on the development of the e-commerce industry
in China.

We rely on the rapid growth of the e-commerce industry in China as most of the ecosystem
partners we work with are existing players in the e-commerce industry and all of our transactions are
completed via the internet, which requires us to react quickly to any development of the e-commerce
market in order to provide timely and reliable fulfillment to our online customers.

As we share a large and growing customer base and extensive transaction data with players in
the e-commerce market and our product design is driven by needs for protection in the internet
ecosystem-oriented economy, we believe the development of the e-commerce industry will directly
influence our understanding of the market, our expansion of customer base and our presence in the
market as well as our corresponding performance in serving customers and realizing our strategies, all
of which will ultimately impact the success and growth of our business.

If we fail to promote and maintain our brand reputation, we may lose market share and our
business, results of operations and financial condition may be materially adversely affected.

We believe that promoting and maintaining awareness of our ZhongAn brand among our
customers, ecosystem partners and other third parties is critical to achieving widespread acceptance
of our products and solutions, gaining trust for our brand and attracting new business partners and
customers to our platform. In most scenarios, our products are embedded into the platforms of our
ecosystem partners, and our brand names are not displayed unless the customers click the “more
information” button to locate the relevant policies of the specific insurance products. Successful
promotion of our brand will depend largely on the quality of the products and solutions we offer and
the effectiveness of our branding/marketing efforts and the customer experience we provide. Our
brand promotion activities may not yield income from increased brand awareness and, even if they do,
any income increases may not offset the expenses we incur to promote our brand. If we are unable to
maintain and further enhance our brand recognition and reputation and promote awareness of our
platform, we may not be able to increase or maintain our current level of customer base and GWP.

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RISK FACTORS

Unfavorable publicity related to our industry, to our competitors or to us, could negatively affect our
brand or reputation and our ability to attract new customers. If we fail to successfully promote and
maintain our brand, if we incur substantial expenses in an unsuccessful attempt to promote and
maintain our brand, we may lose our existing ecosystem partners and customers or be unable to attract
new partners and customers, which may cause our total income to decrease, harm competitiveness and
negatively impact our business and results of operations.

Our business is inherently subject to the personal financial situation and preference of our
customers, and thus may be materially and adversely affected due to the reduction of the
demand for our products and solutions caused by the change of personal financial situation
or preference of our customers.

The insurance market in China, the ecosystems where we operate and our customers’ preferences
are constantly evolving. As a result, we must continuously respond to changes in the market,
ecosystems and customer preferences to remain competitive, grow our business and maintain market
share in the geographical markets in which we operate. We face many risks when introducing new
products. Our new products may fail to be accepted by the market. Our new products may also be
rendered obsolete or uneconomical by competition or developments in the insurance industry.
Furthermore, even if our current and anticipated product offerings respond to changing market
demand, we may be unable to commercialize them. Moreover, new products may potentially fail to
receive necessary regulatory approvals, be difficult to market on a large scale, be uneconomical to
introduce, fail to achieve market acceptance or be precluded from commercialization by proprietary
rights of third parties. An inability to commercialize our products would materially impair the
viability of our business. Therefore, our future success will depend on our ability to adapt to changing
customer preferences, industry standards and new product offerings. Any of these changes may require
us to reevaluate our business model and adopt significant changes to our strategies and business plan.
Any inability to adapt to these changes would have a material adverse effect on our business, financial
condition and results of operations.

We rely on the data we collect throughout the insurance value chain to enhance our business
performance and results, and we cannot assure you that we are able to accumulate or access
sufficient data in the future, the lack of which may materially and adversely affect our
business and results of operations.

As a technology-driven Insuretech company, we highly rely on usage of our data in every step
of the entire insurance value chain, including research and development of our insurance products,
pricing, underwriting, risk management, claim settlement, and customer services etc. We develop our
proprietary technologies on top of cloud computing infrastructures of third-party providers to
automate and streamline the various processes in our operations, support our day-to-day business
analytics and provide periodic or real-time applications in supporting our large amount of transactions
and executing our strategies. We have made substantial investments in ensuring the effectiveness of
our big data analytics that supports our rapid growth and enables us to provide effecient services to
our customers. We cannot assure you that we will be able to continuously collect and retain sufficient
data, or improve our data technologies to satisfy our operating needs. Failure to do so will materially
and adversely affect our business and results of operations.

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RISK FACTORS

We face intense competition in the PRC online insurance industry from traditional insurance
companies and other internet companies, which could lead to adverse pricing pressure,
reduced operating margins, loss of market share, departures of qualified employees and
increased capital expenditures.

Our current or potential competitors, including traditional insurance companies, commercial


banks and internet companies, may have significantly more financial, technical, marketing and other
resources than we do and may be able to devote greater resources to the development, promotion, sale
and support of their platforms and products. They may also have more extensive customer base and
greater brand recognition than we do. As such, they may have stronger capability to develop new
products and solutions, to respond more quickly to new technologies and to undertake more extensive
marketing campaigns. Hence, our ecosystem partners may prefer products and solutions from our
competitors compared to the ones we offer, and competition could result in reduced cooperation
between our ecosystem partners and us, and/or higher fee rates. Our expense ratio during the Track
Record Period increased primarily as a result of the increase in consulting and service fees charged
by our major ecosystem partners for the sale of our insurance policies on their platforms. Please also
refer to “— We depend on our cooperation with our ecosystem partners and other participants in the
ecosystems. Our business might be affected if such partners do not continue to maintain their
relationship with us or by the operational failure of third-party ecosystem partners.” The failure to
achieve or maintain more widespread market acceptance or significant increases in our cost of
customer acquisition, among others, could harm our business and results of operations.

We primarily operate in the ecosystem-oriented innovation segment, which was the smallest
segment in terms of GWP in the PRC Insuretech market in 2016, and is expected to remain the smallest
segment in terms of GWP by 2021, according to the Oliver Wyman Report. In 2016, we accounted for
17% of the ecosystem-oriented innovation segment and only 0.9% of the PRC Insuretech market,
according to the Oliver Wyman Report. Furthermore, the ecosystem-oriented innovation segment is
becoming more populated as an increasing number of traditional insurers have begun to utilize
technology to provide similar products such as shipping return insurance, flight delay or accident
insurance. As a result, some of our products are facing more intense competition. For example, our
GWP from shipping return insurance decreased from 2015 to 2016 partly because there were new
market entrants providing shipping return insurance on the platforms of our major e-commerce
ecosystem partners, such as Taobao Marketplace.

In addition, most of our ecosystem partners are internet companies, whose businesses are
market-driven. If the Insuretech market becomes more developed and profitable, our ecosystem
partners may terminate their cooperation relationship with us and engage in similar business as we do.
All these potential competitors may engage in pricing competition in the future by offering products
with lower cost to customers. Potential pricing competition may force us to lower the prices of our
products and solutions in order to stay competitive and thus cause downward pressure on our income
and margins. If we are unable to compete with our competitors in this industry, the demand for our
products and solutions could stagnate or substantially decline, which could have a material and
adverse effect on our business and results of operations.

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RISK FACTORS

A significant portion of our GWP are contributed by a limited number of insurance products.
If we cannot continue to offer these insurance products for any reason or the popularity of
these products declines, our GWP may decrease and our financial condition and results of
operations may be materially and adversely affected.

We generate a significant portion of our GWP from a limited number of popular insurance
products. As of March 31, 2017, the top five product terms (in terms of GWP) accounted for 57.3%
of the total GWP, as compared to 67.8% in 2016 during the same period. In 2016, our top five product
terms, in terms of GWP, contributed approximately 64.5% of our total GWP, as compared to 74.2%
in 2015, and 82.2% in 2014. We primarily offer and sell these popular insurance products through our
ecosystem partners. If we fail to maintain or renew our cooperation with our ecosystem partners on
acceptable terms or at all, we may be unable to continue offering these popular insurance products
through them and our operating results will be adversely affected. Although we intend to continue to
diversify our product offerings, expand our customer base and generate GWP from insurance products
addressing customer needs in a wider variety of scenarios-based settings, we cannot guarantee you that
we will be able to succeed. If we cannot continue to offer these popular insurance products for any
reason or the popularity of these products decline, our GWP may decrease and our financial condition
and results of operations may be materially and adversely affected.

Our auto insurance business is limited to 18 regions in China, and our expansion to the other
regions in China is subject to the review and approval by the competent PRC governmental
authorities, which brings uncertainty to our growth and profitability.

In 2015, we launched our Baobiao Auto Insurance through our cooperation with Ping An
Insurance. In accordance with the relevant laws and regulations, the sales of auto insurance products
are subject to prerequisite approval by the CIRC or its local counterparts, and the operating activities
relating to auto insurance are extensively regulated by those authorities. As of the Latest Practicable
Date, we are only allowed by the CIRC to conduct business related to auto insurance in 18 regions in
China. Along with the expansion of our auto insurance business into other regions in China that are
not covered by our existing licenses, we are still required to go through various review and approval
procedures with the CIRC or its local counterparts to obtain necessary licenses. We may face
difficulties or unexpected hurdles set by the competent local authorities in determining whether or not
to grant licenses to us due to the evolving regulation environment in China, the variance in the
interpretation to laws and national regulations and in the implementation of such laws and regulations
by different local authorities. We plan to submit applications with the CIRC for engaging auto
insurance business in certain additional regions in China, but we cannot estimate when and whether
the CIRC will issue its approval. Since China’s auto insurance regulatory regime is undergoing
significant changes, we are subject to uncertainties associated with CIRC’s regulation and policies,
which may significantly impact our auto insurance business.

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RISK FACTORS

Our travel-related insurance may face intensive and concentrated claims due to incidents
such as large scale flight delays and major accidents which reflect the nature of the travel
industry, such as flight delay and accidents, which may bring challenges to our financial
condition during a specific period of time.

Our travel-related insurance includes flight delay insurance, travel accident insurance, travel
cancellation insurance and hotel cancellation insurance. Due to the nature of business and tourism
trips, the triggering events for claim settlement can happen all at once and the claims that customers
may raise in case of a triggering event might be abundant. For example, all customers that have
purchased a Flight Delay Policy for a specific flight might simultaneously raise claims when the flight
has been delayed for a certain period of time. Under such circumstances, we may face tremendous
pressure from a sudden surge of claims and we need to be prepared with our resources timely, in
particular the reserves required for payment of claims, to handle the claims we receive from our
policyholders. This sudden increase in claims to be settled may challenge our financial condition and
adversely impact our liquidity situation.

If the third-party service providers in our ecosystem fail to provide secure, reliable and
satisfactory services, or if we fail to maintain or expand our relationship with such service
providers, our business, financial condition and results of operations may be materially and
adversely affected.

We rely on third-party service providers in our ecosystem to provide certain services to us and
our customers. For example, we rely on certain domestic electronics service companies for the repair
services or pickup services associated with our consumer electronics policies. We engage certain
business process outsourcing companies and human resource on-site service providers to cover our
customer inquiry, complaint and related services. To the extent such third-party service providers in
our ecosystem fail to provide secure, reliable, cost-effective and satisfactory services to us and our
customers, we may experience disruptions to our business operations, and our ability to attract
customers may be severely harmed. If any of these third-party service providers stop offering their
services on our platform, we may not be able to find alternative third-party service providers willing
to provide similar services on commercially reasonable terms in a timely manner or at all.
Furthermore, we may fail to establish and maintain additional third party relationships necessary to
support the growth of our business on economically viable terms, or at all. Any interruption to or
discontinuation of our cooperative relationship with key third-party service providers may severely
and negatively impact our ability to serve our customers, and any occurrence of the circumstances
mentioned above may have a material and adverse effect on our business, financial condition and
results of operations.

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RISK FACTORS

We integrate our information technology systems within our ecosystem partners’ platforms.
Any unauthorized data revision or failure to maintain data integrity on the part of third
parties may severely and negatively impact our ability to serve our customers.

Our Insuretech business requires us to be capable of processing data and information speedily.
To support our operations with large amount of transactions through the cooperation with our
ecosystem partners, we integrate our information technology systems into our ecosystem partners’
environment. For example, we integrate our system to the database of the e-commerce platforms we
cooperate with, which has greatly reduced the labor cost required by our business and improved our
capability of automatic processing. If any of our partners inappropriately revises any data or
information stored by us in its database without our authorization or fails to maintain data integrity,
or if any third party of our partners is able to penetrate our network to damage data and security or
otherwise impede the normal operation of the database against our interest, the operation of our
business may be materially and adversely affected or even be interrupted.

Our business is highly dependent on the proper functioning and improvement of our
information technology systems and infrastructure as well as internal control system. If we
fail to keep up with technological developments and evolving consumer demands and
expectations, our business and operating results may be materially and adversely affected.

We operate in a market characterized by rapidly developing technologies, evolving industry


standards, frequent new product and service launches and updates, and changing user demands and
expectations. The continuing popularity of our products and solutions and our ability to further
monetize depend in significant part on our ability to adapt to these rapidly changing technologies and
industry standards as well as our ability to continually innovate in response to evolving user demands
and expectations and intense market competition. Any failure on our part to act effectively in any of
these areas may materially and adversely affect our business and operating results.

Moreover, enhancing legacy technologies and incorporating new technologies into our platform
involves numerous technical challenges, substantial capital, human capital and significant time, and
we may not be able to handle these challenges effectively due to numerous factors, some of which are
beyond our control. For instance, our ability to predict customer demands and expectations is linked
to the size of our customer base, as the more samples of user behavior we collect, the more accurate
our partners’ platforms and our apps can be in making the product recommendations to users through
different scenarios. If we fail to retain or expand our customer base or maintain customer engagement
levels in our ecosystem partners or our platforms, the amount of data available to us for analysis would
be affected, and our ability to predict customer preferences may be adversely impacted. Thus, all of
the factors that affect the size and level of activities of our customer base also affect our ability to keep
up with technology and user expectations.

Our failure to anticipate or successfully implement new technologies could render our business
uncompetitive, and reduce our income and market share. Although we have been and will continue to
devote significant resources to the enhancement and development of technologies, products and
solutions, we may not be able to effectively develop or integrate new technologies on a timely basis

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RISK FACTORS

or at all, which may decrease customer satisfaction. In addition, new technologies may not succeed
or integrate well with our products and solutions, and even if integrated, may not function as expected
or may be unable to attract and retain a substantial number of customers. Our failure to keep pace with
rapid technological changes may impact our ability to retain or attract customers or generate income,
and have a material and adverse effect on our business and operating results.

Our operations depend on the performance of the internet infrastructure and


telecommunications networks in China. We cannot assure you that the internet infrastructure
and the telecommunications networks in China will be able to support the demands
associated with our continued growth in internet usage.

Almost all access to the internet in China is maintained through state-owned telecommunication
operators under the administrative control and regulatory supervision of the Ministry of Industry and
Information Technology, or the MIIT. Moreover, we primarily rely on a limited number of
telecommunications service providers to provide us with data communications capacity through local
telecommunications lines and internet data centers to host our servers. We have limited access to
alternative networks or services in the event of disruptions, failures or other problems with China’s
internet infrastructure or the fixed telecommunications networks provided by telecommunication
service providers. Web traffic in China has experienced significant growth during the past few years.
Effective bandwidth and server storage at internet data centers in large cities such as Shanghai and
Beijing are scarce.

With the expansion of our business, we may be required to upgrade our facilities, technology,
operation and IT infrastructure to keep up with the increasing traffic on our platform, which may
require substantial investment. In addition, we cannot assure you that the internet infrastructure and
the fixed telecommunications networks in China will be able to support the demands associated with
the continued growth in internet usage. If we are unable to increase our online service delivering
capacity accordingly, we may not be able to continuously grow the traffic to our platform, and the
adoption of our financial services may be hindered, which could adversely impact our business and
our profitability.

Any significant disruption in service on the website, the mobile applications or in our
computer systems or our ecosystem partners, including events beyond our control, could
materially and adversely affect our business, financial condition and results of operation.

Our business is dependent on the ability of our information technology systems to timely process
a large amount of information and transactions. The satisfactory performance, reliability and
availability of our technology and our underlying network infrastructure are critical to our operations,
level of customer service, reputation and ability to retain and attract customers. Our system hardware
is hosted in various locations in China. We are able to achieve a real-time backup of our operating
system through the cloud-based data base, which automatically and constantly save all our operating
data and retain the same for seven days. We are not guaranteed that access to our website and our
mobile applications will be uninterrupted, error-free or secure. Our operations depend on the ability

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RISK FACTORS

of the host of our system hardware to protect its and our systems in its facilities against damage or
interruption from natural disasters, power or telecommunications failures, air quality, temperature,
humidity and other environmental concerns, computer viruses or criminal acts. If our arrangement
with the current host is terminated, or there is a lapse of service or damage to the host’s facilities, we
could experience interruptions in our service as well as delays and additional expense in arranging
new facilities. In the event of a partial or complete failure of any of our computer systems, our
business activities would be materially disrupted. In addition, a prolonged failure of our information
technology system could damage our reputation and materially and adversely affect our future
prospects and profitability.

The sophisticated and innovative technologies we use for the operation of our business, in
particular the blockchain and artificial intelligence technologies, are new and subject to
further exploration by market players. We cannot assure you that the performance of those
technologies will be stable to support our business.

Our Insuretech services are built on huge stacks of data, so we adopt sophisticated and innovative
technologies, in particular blockchain and artificial intelligence, to address our operating needs,
predict operating patterns and help make decisions in terms of business strategies and implementation
plans. We aim to make our operations more streamlined, automated and cost-effective by using these
advanced technologies. The blockchain to be applied in the entire ecosystem is still under
construction, and the implementing and experimenting with the artificial intelligence is still at the
early stage. As such, it is difficult to predict when the blockchain can be applied into practice
extensively and whether the performance of artificial intelligence and blockchain can be effective and
advantageous on a long-term basis as we anticipate. Moreover, we believe the legal and regulatory
issues involved in the application of blockchain and artificial intelligence are unclear and difficult to
predict, which brings uncertainties to the operation of business.

Our risk management and internal control systems, as well as the risk management tools
available to us, may not be adequate or effective in identifying or mitigating risks to which
we are exposed to, which could materially and adversely affect our business or results of
operations.

While we have established risk management and internal control systems consisting of
organizational framework, policies, procedures and risk management methods that we consider
appropriate for our business operations, we experienced failures in risk management and internal
control in the past. While we seek to improve and reinforce our risk management and internal control
systems over time, we cannot assure you that such systems will be able to identify, manage or protect
us against all risks, and we may need more time to fully evaluate and assess the adequacy and
effectiveness of these systems. We may need to further improve our risk management and internal
control systems from time to time.

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RISK FACTORS

We implement our risk management and internal control by using a series of methods. See
“Business—Risk Management” and “Business—Internal Control Measures.” However, as risk
management and internal control methods are generally based on analysis of historical situations, and
the assumption that risks in the future will share similar characteristics with those in the past, we
cannot assure you that such assumptions will always be valid. We commenced our operations in 2013,
and our limited historical information and operating experience may not be sufficient to adequately
reflect the risks to which we are exposed. Such risks could be greater than what our empirical
information suggests or may not be reflected in such information at all.

We have significantly upgraded our information technology system in recent years to better assist
in the collection, analysis and processing of information. However, there may be uncertainties,
limitations or technical defects associated with the tools, software and models used by us to analyze,
monitor and manage risks or in connection with their applications. We cannot assure you that our
existing information technology system will be adequate and sufficient in the future. As a result, our
risk management methods and techniques, which depend on the data collection and analysis
capabilities of our information technology system, may not be effective in directing us to take timely
and appropriate measures in risk management and internal control.

Our risk management and internal controls also depend on our employees for their effective
implementation. Given the various business departments within the Company and their intensive
collaboration in executing our business plans, we cannot assure you that such implementation will not
involve human errors or mistakes, which may have a material adverse effect on our business, results
of operations and financial condition.

As the regulation of the PRC insurance and Insuretech industries are constantly evolving and the
PRC Insuretech market continues to grow, we are likely to offer a broader and more diverse range of
Insuretech products in the future. The diversification of our Insuretech product offerings will require
us to continue to enhance our risk management capabilities. Our failure to adapt our risk management
policies and procedures to our evolving business in a timely manner could have a material adverse
effect on our business, results of operations and financial condition.

We rely on our cloud-based and data-driven risk management system to control risk. If the
data we collect or the analytics technology we adopt is inaccurate, our risk tracking and
pricing capabilities may be materially adversely affected.

We use a cloud-based and data-driven risk management system to minimize our risks and
enhance our risk management capabilities. The effectiveness of the real-time cloud computing data
analytics technology is conditioned on the accuracy and completeness of the data and information we
collect and thereafter use in our system. In the event that any such data or information is inaccurate
or incomplete, we face the risk that the corresponding measures and solutions we take based on the
data and information will not be workable to address the relevant risks or the pricing we make based
on the data and information will not be accurate or reliable in estimating our profit, and our overall
risk management system may be rendered ineffective. Moreover, given that we only have a relatively
short operating history in managing our data-driven system, we may face the risk of inaccurate
pricing. As a result, our products may not be profitable. As a result, it in turn may lead to a higher
level of risks and adversely impact our reputation, business and results of operations.

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RISK FACTORS

If our risk management procedures and policies become ineffective or if we fail to effectively
implement or follow such procedures, our business, financial condition and results of
operations may be materially and adversely affected.

Our ability to reduce risks associated with our business depends on our ability to implement and
maintain an effective risk management system. We have established extensive risk management
policies and procedures that seek to mitigate the riskiness of the transactions we facilitate. See
“Business—Risk Management—Management of Credit Risk.” However, as we have a relatively short
operating history in the Insuretech industry, our historical experience may not provide a sufficient
basis for us to evaluate and maintain the effectiveness of our risk management system at all times. The
risk management procedures and policies we have in place may not be able to anticipate certain risks
or the magnitude of potential losses that may be caused by such risks. Our risk modeling and methods
might not be adequate in effectively evaluating potential risks. Furthermore, human errors made by
certain employees may unpredictably cause us to render the wrong decisions on customizing our
products for various customers. If our risk management policies and procedures turn out to be
ineffective or if we fail to effectively implement them or if our employees and agents fail to correctly
carry out such policies and procedures, we may experience unanticipated results in executing our
transactions, and our business, financial conditions and results of operations may be materially and
adversely affected.

We face potential default or fraud of our customers who lack creditworthiness, and our
Company may be subject to losses and financial liability to our cooperative partners that
provide funds for such defaulted customers.

Transactions on our or our ecosystem partners’ platforms as well as our credit risk assessment
procedures may be subject to sophisticated schemes or collusion to defraud or other illegal activities,
and there is a risk that the platforms may be used for such purposes by our customers. While we have
internal controls and procedures designed to prevent such fraud and misconduct, we may not always
be able to detect or prevent such misconduct in a timely manner, and the precautions we take to
prevent these activities may not be effective in all cases. Failure to protect our operations and our
cooperative partners from fraudulent activities by our customers could result in reputational damage
to us and could materially and adversely affect our results of operations.

Failure to maintain accuracy in actuarial statistics and capabilities in underwriting and


pricing of our products could have a material adverse effect on our business, results of
operations and financial condition.

We rely heavily on the accuracy in actuarial statistics and capabilities in underwriting and
pricing of our products to conduct our business, including recording and processing our operational
and financial data and effectively executing our business plans through accurate actuarial analysis and
pricing modeling. The proper functioning of our actuarial analysis, statistical analysis, products
pricing, risk management, financial control, accounting, customer database, customer service,
investment management and other data processing systems, including those relating to underwriting
and claim settlement, is highly critical to our business and our ability to compete effectively. We rely

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on our artificial intelligence and data capabilities to perform, among other things, our actuarial
analysis and pricing modeling. We cannot guarantee you we will be able to continue to upgrade our
technology and maintain our capacity and accuracy. Failure of maintaining such capacity and accuracy
could have a material adverse effect on our business, results of operations and financial condition.

We rely on third-party asset management companies to provide investment services.

Our investment activities consist of cooperating with third-party asset management companies
and purchasing asset management products. We primarily rely on Ping An Asset Management Co., Ltd.
to provide investment services and asset management. As of March 31, 2017, Ping An Asset
Management Co., Ltd. managed 95.4% of our total investment assets. Although the asset management
companies we cooperate with are CIRC-recognized domestic asset management companies and are
frequently used by PRC commercial banks or large institutions, the services they provide may not meet
our expectations. As a result, we may be subject to the risk of underperformance in managing our
assets by such asset management companies. Although we attempt to minimize the risks associated
with these asset management companies through sophisticated evaluation mechanisms and a portfolio
of diversified investments to hedge risks and motivate their performance, we cannot assure you that
we will be successful in identifying all related risks and making our investment decisions
appropriately. To the extent that we suffer significant losses due to the unsatisfied performance of
these asset management companies, our results of operations and financial condition would be
materially and adversely affected.

As an insurance company, we are subject to CIRC’s regulations on the types of products that
we are allowed to invest in, which may limit our ability to diversify our investment portfolio,
and we cannot assure you that we will be able to comply with those requirements in the
future.

The investment channels available to PRC insurance companies are subject to CIRC’s
supervision and regulation, enabling us to invest in only the following limited types of products
subject to approval by the CIRC: (i) government, financial and corporate bonds, (ii) securities
investment funds, (iii) preferred shares, (iv) term deposits, (v) venture capital investment funds, (vi)
RMB-denominated stocks listed on PRC stock exchanges, (vii) equities of unlisted companies or
equity investment funds, (viii) infrastructure debt investment plans, (ix) real estate, (x) financial
products; (xi) financial derivatives; and (xii) overseas investments. Although the PRC regulatory
authorities, including CIRC, have significantly expanded the asset classes in which PRC insurance
companies are permitted to invest in recent years, the asset classes remain limited, as compared to
those available to many international insurance companies. Even with the broadened investment types,
our ability to diversify our investment portfolio continues to be limited by the restrictions on the
amount and percentage that we can invest in some of these assets classes, such as stocks listed on PRC
stock exchanges and securities investment funds. See “Regulatory Overview—Deployment of
Insurance Funds”. Substantially all of our investments are solely concentrated in certain permitted
assets classes. In addition, each type of products that we invest in possesses its own risks. By
complying with the requirements and regulations of the CIRC, we are exposed to specific risks of
certain products that cannot be leveraged among our investment portfolio given the limited types of
products that are allowed to invest. As a result, our limited ability to diversify our investments may
have a material adverse effect on our business, results of operations and financial condition.

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Our investment portfolio is subject to volatility of the PRC securities market and may expose
us to unrated instruments and illiquid assets risk, and the investment assets may experience
sharp declines in their returns or suffer significant losses, which would have a material
adverse effect on our results of operations and financial condition.

Our investment returns, and thus our profitability, may be materially and adversely affected by
conditions affecting our investments, including currency exchange rates, credit and liquidity
conditions, the performance and volatility of the PRC capital markets, asset values, and
macroeconomic and geopolitical conditions. Any significant deterioration in one or more of these
factors could reduce the value of, and the income generated by, our investment portfolio and could
have a material adverse effect on our business, financial condition and results of operations. For
example, our net investment income and total investment yield in 2016 decreased significantly due to
adverse market conditions.

Our financial assets are classified into several categories, including at fair value through profit
or loss, loans and receivables, held-to-maturity financial assets and available for sale. Gains or losses
arising from changes in the fair value of the financial assets at fair value through profit or loss
category are recorded as net fair value gains through profit or loss on our consolidated statement of
comprehensive income and are a component of our total income. Changes in the fair value of monetary
and non-monetary securities classified as available for sale are recorded as other comprehensive
income on our consolidated statement of comprehensive income. The fair value of investment assets
are generally prices that would be received in the principal market or most advantageous market for
such assets. The fair value of our investment assets, particularly equity and fixed-income assets, are
primarily determined by the general conditions of the PRC capital markets. Market fluctuations or
other factors affecting the fair value of our investment assets may have a material effect on our total
investment yield and results of operations.

We are also exposed to credit risks in relation to our investments, including a decrease in the fair
value of securities we own, a downgrade in credit ratings of securities we own and the credit risks of
counterparties in our investment activities. As of March 31, 2017, 99% of the bonds we held received
external ratings of AA level or above from CIRC-recognized domestic rating agencies. However, these
domestic rating agencies may not use the same methods or have the same analytical capabilities as
internationally-recognized rating agencies, such as Standard and Poor’s, Moody’s and Fitch.
Consequently, domestic credit ratings, even with the same rating symbols, may not reflect the same
creditworthiness as a rating by an internationally-recognized rating agency, and we may be subject to
greater credit risks with respect to our investments in debt securities than we believe, which could
result in a decrease in the fair value of our debt securities, giving rise to impairment losses.

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Failure to ensure and protect the confidentiality of the personal data of customers on our
platform or to comply with data privacy and protection laws and regulations could negatively
impact our reputation or deter customers from using our platform, which could materially
affect our results of operations.

A significant challenge to providing technology-based products and solutions is the secure


collection, storage and transmission of confidential information. In providing our products and
solutions, we hold certain private information about our customers, such as their names, addresses,
contact information and social media footprint, as well as financial and credit information. We also
need to provide such information to our ecosystem partners and other parties for the purpose of
conducting the transactions. Customers demand complete security for such confidential information,
which is essential to maintaining customer confidence. In addition, we are subject to various laws,
regulations and rules governing the protection of the personal data and confidential information of our
clients. PRC data privacy laws restrict our storage, use, processing, disclosure, transfer and protection
of nonpublic personal information provided to us by our customers.

On December 12, 2012, the Standing Committee of the National People’s Congress promulgated
the Decision on Strengthening Network Information Protection, or the Network Information Protection
Decision, to enhance the legal protection of information security and privacy on the internet. The
Network Information Protection Decision also requires internet operators to take measures to ensure
confidentiality of information of users. In July 2013, the MIIT promulgated the Provisions on
Protection of Personal Information of Telecommunication and Internet Users to regulate the collection
and use of users’ personal information in the provision of telecommunication service and internet
information service in China. On November 7, 2016, the Standing Committee of the National People’s
Congress promulgated Cyber Security Law effective on June 1, 2017, according to which internet
service providers shall undertake the responsibility of cyber security protection. These existing and
any additional proposed laws and regulations can be costly to comply with and can delay or impede
the development of our new products, result in negative publicity, increase our operating costs, require
significant management time and attention, and subject us to claims or other remedies, including fines
or demands that we modify or cease existing business practices. In addition, public concerns about our
practices with regard to the collection, use or disclosure of personal information or other
privacy-related matters, even if unfounded, could damage our reputation and operating results.

We rely on a network of process and software controls to protect the confidentiality of data
provided to us or stored on our systems. We also rely on contracts with our partners, including our
ecosystem partners and third-party providers, to ensure their protection of the private information we
provide to them. If we or our partners do not maintain adequate internal controls or fail to implement
new or improved controls, such data could be misappropriated or confidentiality could otherwise be
breached. If we or our partners inappropriately disclose any personal information, or if third parties
are able to penetrate our network security or otherwise gain access to confidential information, we
could be subject to claims for identity theft or other similar fraud claims or claims for other misuses
of personal information, such as unauthorized marketing or unauthorized access to personal
information. While we strive to protect our customers’ privacy and comply with all applicable data
protection laws and regulations, any failure or perceived failure to do so may result in proceedings or

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actions against us by our customers, government entities or others, and could damage our reputation
and subject us to fines and damages. In addition, such events would lead to negative publicity and
cause customers to lose their trust and confidence in us, which may result in material and adverse
effects on our reputation, business, financial condition and results of operations.

With the substantial change in the way people access the internet and the intrinsic expectation
that data be protected, practices regarding the collection, use, storage, transmission and security of
personal information by companies operating over the internet and mobile platforms are under
increased public scrutiny across a number of countries. As online insurance business continues to
evolve, we believe that increased regulation by the PRC or other governments of data privacy on the
internet is likely. We may become subject to new laws and regulations applying to the solicitation,
collection, processing or use of personal or consumer information that could affect how we store,
process and share data with our customers, partners and third-party providers.

In addition, in light of the borderless nature of the internet, we may be directly or indirectly
subject to the laws and regulations on personal data and privacy, which have been increasing and
tightening in recent years, of multiple jurisdictions in addition to the PRC. For example, in Hong
Kong, the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong) restricts a
company’s collection, processing and use of personal data, including the sale or transfer of personal
data for direct marketing purposes. The European Union has also adopted the EU e-Privacy Directive
and is reforming its existing data protection legal framework.

We generally strive to comply with laws and industry standards and are subject to the terms of
our own privacy policies. Compliance with any additional laws, along with the push for
comprehensive data protection regulation, could be expensive, and may place restrictions on the
conduct of our business and the manner in which we interact with our customers and ecosystem
participants. Any failure by us or our ecosystem partners to comply with applicable regulations could
also result in regulatory enforcement actions against us and adversely impact our reputation. In
addition, some of our ecosystem partners may require us to indemnify and hold them harmless from
the costs or consequences of litigation resulting from using their platforms. Concerns regarding the
collection, use or disclosure of personal information or other data privacy-related matters, even if
unfounded, could damage our reputation and results of operations.

We may be subject to intellectual property infringement claims or other allegations by third


parties, which may materially and adversely affect our business, operating results and
prospects.

We believe that our brand name, copyrights, trademarks and other intellectual property are
essential to our success. We depend to a large extent on our ability to develop and maintain the
intellectual property rights relating to our technology and online platforms. We have devoted
considerable time and energy to the development and improvement of our brand name, websites,
mobile apps and our online platforms. We cannot be certain that third parties will not claim that our
business infringes upon or otherwise violates patents, copyrights or other intellectual property rights
that they hold. Companies in the internet and technology sectors are frequently involved in litigation

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related to allegations of infringement of intellectual property rights, unfair competition, invasion of


privacy, defamation and other violations of other parties’ rights. The validity, enforceability and scope
of protection of intellectual property rights in internet-related industries, particularly in China, are
still evolving. We may face allegations that we have infringed the trademarks, copyrights, patents and
other intellectual property rights of third parties, including our competitors, or allegations that we are
involved in passing off or unfair trade practices. For example, a party has alleged that our use of the
characters “眾安” in our company name represents passing off of their trade name in Hong Kong due
to that party having the same Chinese characters in its company name. We have been duly registered
in Hong Kong as a non-Hong Kong company pursuant to the Companies Ordinance and do not carry
on any business in Hong Kong other than the establishment and maintenance of a share transfer and
registration office for our H Shares to be issued pursuant to the Global Offering. We have registered
our trade name for the purpose of carrying on our business in Hong Kong as “ZA Online Fintech P
& C”, and, after consulting with our Hong Kong legal counsel, we do not believe that this allegation
will have any material impact on us in light of the use of a trade name that is completely different from
“眾安” in conjunction with the name of our company name as a PRC incorporated company and the
circumstances of use of the company name and trade name as stated above. If we face any intellectual
property claim in relation to this matter and we are not able to successfully defend the claim, the
adverse party may seek interlocutory relief against us or threaten to take other actions during the
Global Offering and/or upon our Listing and this may impact on our ability to use the company name
of “眾安” in Hong Kong and our brand name and reputation, our business, financial condition and
results of operation may be materially and adversely affected. Notwithstanding the various measures
taken by us in good faith to mitigate the risks associated with this alleged claim, we are not able to
exert any control or influence over third parties, including the press and media, and the manner in
which they refer to us. As we face increasing competition and as litigation becomes a more common
method for resolving commercial disputes, we face a higher risk of being the subject of intellectual
property infringement claims. See “Business—Intellectual Property” in this prospectus for further
information.

If any claim or litigation is raised against us in the future, we cannot assure you that we can
defend against such claims successfully. In addition, defending against intellectual property claims is
costly and can impose a significant burden on our management and resources, and favorable final
outcomes may not be obtained in all cases. Such claims, even if they do not result in actual liability,
may harm our reputation. Any resulting liability or expenses, or changes required to our products and
solutions to reduce the risk of future liability, may have a material adverse effect on our business,
results of operations and prospects.

Our inability to use software licensed from third parties, including open source software,
could negatively affect our ability to sell our solutions and subject us to possible litigation.

Our technology platform incorporates software licensed from third parties, including open source
software, which we have been authorized to use. The terms of many open source licenses to which we
are subject have not been interpreted by courts, and there is a risk that such licenses could be
construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide
our solutions to our customers. In addition, the terms of open source software licenses may require
us to provide software that we develop using such software to others on unfavorable license terms. For

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example, certain open source licenses may require us to offer the components of our platform that
incorporate the open source software for free, to make available source code for modifications or
derivative works we create based upon, incorporating or using the open source software, and to license
such modifications or derivative works under the terms of the particular open source license.

In the future, we could be required to seek licenses from third parties in order to continue use
our platform, in which case licenses may not be available on terms that are acceptable to us, or at all.
Alternatively, we may need to re-engineer our platform or discontinue the use of portions of the
functionality provided by our platform. Our inability to use third-party software could result in
disruptions to our business, or delays in the development of future offerings or enhancements of our
existing platform, which could materially and adversely affect our business and results of operations.

Not all of our proprietary technologies are protected by intellectual property rights registered
with the relevant governmental authorities in China. If we fail to protect our intellectual
property rights or prevent the loss or misappropriation of our intellectual property rights, we
may lose our competitive edge and our brand, reputation and operations may be materially
and adversely affected.

We protect our intellectual property rights through a combination of patent, copyright, trademark
and other intellectual property laws as well as confidentiality and license agreements with our
employees, suppliers, partners and others. However, as of the Latest Practicable Date, not all of
proprietary technologies, including certain components of our Wujieshan platform, are protected by
intellectual property rights registered with the relevant competent governmental authorities in China.
See “Business—Intellectual Property” in this prospectus for further information. Due to the lack of
registered intellectual property rights over these unprotected technologies, third parties may obtain
and use intellectual property that we own over these technologies, which may harm our business and
adversely affect the results of our operations.

Unauthorized use of any of our intellectual properties may adversely affect our business and
reputation. We rely on a combination of patents, copyrights, trademarks and trade secrets laws to
protect our intellectual property rights. Nevertheless, third parties may obtain and use our intellectual
property without due authorization. For instance, we have noticed that certain third-party companies
engaging in investment consulting and management services, e-commerce technology development
and assets management are operating under the name ZhongAn with such kind of similarity that may
cause confusion or speculations over whether there is any affiliation or cooperation between us and
those third-party companies, which may harm our brand and reputation and adversely affect our results
of operations. We are initiating certain proceedings for a precautionary purpose but we do not believe
that these currently existing unauthorized uses of the ZhongAn name can seriously affect our
operations.

The practice of intellectual property rights enforcement action by Chinese regulatory authorities
is in its early stage of development and is subject to significant uncertainty. We may also need to resort
to litigation or other legal proceedings to enforce our intellectual property rights. Any such action,
litigation or other legal proceedings could result in substantial costs and diversion of our
management’s attention and resources and could disrupt our business. In addition, there is no

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assurance that we will be able to enforce our intellectual property rights effectively or otherwise
prevent others from the unauthorized use of our intellectual property. Failure to adequately protect our
intellectual property could materially and adversely affect our brand name and reputation, and our
business, financial condition and results of operations.

We are required to obtain certain licenses for our business operation and insurance products,
and we may not be able to obtain or maintain our licenses to run such business or to market
and sell such insurance products.

We are required to obtain applicable licenses, permits and approvals from different PRC
regulatory authorities in order to conduct our business. Over the past several years, various
governmental authorities in the PRC have issued regulations on specific aspects of the insurance
business and internet content and services. Certain regulations require operators to obtain licenses,
permits or approvals that were not required previously. There can be no assurance that the government
authorities will not continue to issue new regulations governing the internet or the Insuretech industry
that will require us to obtain additional licenses, permits or approvals in order to operate our existing
business or will prohibit us from engaging in those types of business to which the new requirements
will apply. Among other things, new regulations or new interpretations of existing regulations could
increase the Company’s costs of doing business and prevent the Company from efficiently delivering
services and products over the internet. As we plan to expand our business to engage in life insurance
area, we are in the process of applying for life insurance license with CIRC and will be subject to other
rules and regulations in addition to the rules and regulations currently imposed on us. We cannot
assure you that we will be able to satisfy the requirements from CIRC to obtain such life insurance
license in a timely manner or at all.

If we are deemed by overseas jurisdictions to be conducting insurance business, we may need


to obtain licenses for our business operation and insurance products in that jurisdiction.

Each of our insurance products are based on product terms approved by the CIRC and the terms
and conditions of our insurance policies are all governed by the laws of the PRC. As our subsidiaries
and operations are all within the PRC, our insurance products are targeted at customers located in the
PRC and we do not conduct any marketing activities outside the PRC, we believe we do not need, and
have not applied for, insurance licenses in any jurisdictions other than the PRC. However, in light of
the borderless nature of the internet, there are uncertainties in the interpretation, application and
enforcement of the licensing requirements with respect to companies in various jurisdictions. We
cannot guarantee that we will not be required to obtain licenses for our business operation and
insurance products in jurisdictions other than the PRC. For example, we do not currently carry on an
insurance business in or from Hong Kong and, as such, have not applied for an insurance license
pursuant to the Insurance Ordinance (Chapter 41 of the Laws of Hong Kong). Please see the section
headed “Business — Licenses, Permits and Approval” for further details. To the best knowledge of our
Directors, there are no precedents of companies having been found liable for carrying on an insurance
business in Hong Kong purely by way of operating an online insurance business in the PRC. However,
if we are found to carry on an insurance business in or from Hong Kong without an insurance license
pursuant to the Insurance Ordinance, we commit an offence and may be liable (a) on conviction upon
indictment to a fine of HK$2 million and (b) on summary conviction to a fine of HK$200,000, together
with, in either case, a fine of HK$2,000 for each day on which the offence continues. Also, as advised

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by our PRC Legal Advisor, we may be liable for penalties if the actions of our ecosystem partners
result in them being found to have carried on business in contravention of the PRC insurance
regulations, and we are not permitted under the PRC insurance regulations to exclude any liability for
any actions of our ecosystem partners in relation to the dealings for the issue of a contract of insurance
and insurance business relating to the contract. If we fail to obtain and maintain any licenses and
approvals where required or otherwise fails to comply with applicable laws, rules and regulations in
jurisdictions other than the PRC where required, or if new laws, rules or regulations come into effect
that require us to obtain additional licenses, we may be subject to fines, injunctive orders and other
penalties, as well as adverse reputational risk. In addition, license requirements in multiple
jurisdictions could result in additional compliance obligations and increased costs, or place
restrictions on our current or future business.

We depend on our key management and actuarial, information technology, underwriting,


sales and other personnel, and our business, financial condition and growth prospects may be
severely disrupted if we lose their services or are unable to attract new employees to replace
these key personnel.

The successful execution of our business plans depends to a large extent on our ability to attract
and retain key personnel who have an in-depth understanding of the Insuretech industry in China as
well as our business model and strategies. Those key personnel include members of our senior
management, in particular, our Chairman, Mr. Yaping Ou, a successful entrepreneur and the founder
of two public companies and the controlling shareholder of a company listed on Main Board of the
Stock Exchange, our chief executive officer, Mr. Jin Chen, who has nearly 20 years’ experience in
finance and business management, and Mr. Xing Jiang, who is our chief technology officer in charge
of the information technology department of the Company and operations of ZhongAn Technology as
well as qualified underwriting personnel, actuaries, information technology specialists, experienced
investment managers, sales staff and other personnel. According to PRC Labor Contract Law and
related regulations, we cannot prevent such personnel from terminating their respective contracts in
accordance with the relevant agreed terms and conditions. As a result of the increase in the number
of Insuretech companies in China and other fintech companies and the rapid expansion of their
business operation, the market demand and competition for talented management personnel and
technical staff has intensified. We cannot assure you that we will be able to attract and retain qualified
key personnel or that they will not retire or leave our Company in the future. The loss of the services
of our senior management and other key personnel and our failure to adequately and timely replace
them could have a material adverse effect on our business, results of operations and financial
condition.

Our performance depends on favorable labor relations with our employees, and any
deterioration in labor relations, shortage of labor or material increase in wages may have an
adverse effect on our results of operation.

Favorable labor relations are considered a significant factor that can affect our business
performance and operating results. In this regard, any deterioration of our labor relations could cause
labor disputes, resulting in the disruption of our production and business operations.

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Labor costs in China have risen in recent years as a result of social development and increasing
inflation in China. Average labor wages in China are expected to experience continued increases. We
may also need to increase our total compensation packages to attract and retain experienced personnel
who are required for the achievement of our business objectives. Any material increase in our labor
costs resulting from factors including but not limited to the aforesaid may have an adverse effect on
our business, financial condition and results of operations.

Confidentiality agreements with employees and others may not adequately prevent disclosure
of trade secrets and other proprietary information.

We consider proprietary trade secrets and/or confidential know-how and unpatented know-how
to be important to our business. We may rely on trade secrets and/or confidential know-how to protect
our technology, especially where patent protection is believed by us to be of limited value. However,
trade secrets and/or confidential know-how can be difficult to maintain as confidential.

To protect this type of information against disclosure or appropriation by competitors, our policy
is to require our employees, ecosystem partners, consultants, contractors, third-party providers and
advisors to enter into confidentiality agreements with us. However, current or former employees,
consultants, contractors, third-party providers and advisers may unintentionally or willfully disclose
our confidential information to competitors, and confidentiality agreements may not provide an
adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a
claim that a third party obtained illegally and is using trade secrets and/or confidential know-how is
expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may
vary from jurisdiction to jurisdiction.

Failure to obtain or maintain trade secrets and/or confidential know-how trade protection could
adversely affect our competitive position. Moreover, our competitors may independently develop
substantially equivalent proprietary information and may even apply for patent protection in respect
of the same. If successful in obtaining such patent protection, our competitors could limit our use of
our trade secrets and/or confidential know-how.

If we cannot maintain our corporate culture as we grow, we could lose the innovation,
collaboration and focus that contribute to our business.

We believe that a critical component of our success is our corporate culture, which we believe
fosters innovation, encourages teamwork and cultivates creativity. Our entrepreneurial and innovative
corporate culture plays a significant role in paving the way for the successful operation of our
businesses as we have experienced rapid growth since our inception in 2013. It leads to our flat
start-up style organizational structure that encourages our personnel to take ownership in the insurance
value chain and enhance the operational efficiency. Such a positive and rewarding culture helps our
personnel achieve their full potential and make our Company a place for them to work seamlessly and
to be as innovative, creative and collaborative as possible, and those characteristics align with our
business strategies.

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As we develop the infrastructure of a public company and continue to grow, we may find it
difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our
culture could negatively impact our future success, including our ability to attract and retain
employees, encourage innovation and teamwork and effectively focus on and pursue our corporate
objectives.

The interests of our shareholders may not be aligned with your or our interests, and we
cannot assure you that they will not reduce their support for our Company in the future.

We may have overlap with the business of our shareholders immediately after the completion of
the Global Offering. We cannot assure you that our shareholders will act in the best interest of our
Company should any conflict arise. If they fail to act in our best interests, for example, if they fail
to continue their cooperation with us through their platform and traffic direction, or conduct business
in an unacceptable manner or take other actions that are detrimental to our interests, we may have to
renegotiate with them for the cooperation or attempt to approach other business partners as
replacements, which may be expensive, time-consuming and disruptive to our operations. If we are
unable to resolve any such conflicts, or if we suffer significant delays or other obstacles as a result
of such conflicts, our business and operations could be severely disrupted, which could materially and
adversely affect our results of operations and financial condition.

Our shareholding structure is relatively dispersed and may subject us to uncertainties


relating to changes in our shareholders or their corporate structures.

Our shareholding structure is relatively dispersed and we do not have a single controlling
shareholder or group of controlling shareholders. See the section headed “History and Corporate
Structure” in this prospectus for further details. Although our current Shareholders other than our
Pre-IPO Investors will continue to hold domestic shares upon completion of the Global Offering, our
shareholding structure may nevertheless be less stable than those of companies with controlling
shareholders, and may subject us to uncertainties relating to changes in our Shareholders or their
corporate structures. For example, if any of our current or future Shareholders are viewed as being
ultimately controlled by non-PRC holding companies, it may impact whether we are viewed as having
a sufficient level of our equity controlled by PRC shareholders for regulatory purposes. Furthermore,
the corporate structures of our Shareholders may need to be changed in the future due to potential
changes in applicable laws and regulations, which may lead to uncertainties in our shareholding
structure.

We operate in a capital intensive industry and require a significant amount of working


capital to fund our operations. We may need additional capital in the future, but we cannot
assure you that we will be able to obtain such capital on acceptable terms, or at all. If we
cannot obtain sufficient working capital, our business, financial condition and prospects may
be materially and adversely affected.

The Insuretech industry that we engage in requires us to possess a significant amount of working
capital to support the function of our huge volume of transactions and our robust operations of

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business. In order for us to grow, remain competitive, enter new businesses, expand our scale of
operations or meet regulatory capital adequacy or solvency margin ratio requirements, we may need
new capital in the future. Our ability to obtain additional capital in the future is subject to a variety
of uncertainties, including:

• our future financial condition, results of operations and cash flows;

• the ability to obtain the necessary regulatory approvals on a timely basis;

• the Shareholders’ ability to make continuous contributions;

• general market conditions for capital raising activities; and

• economic, political and other conditions in the PRC and elsewhere.

Our evolving business may require additional capital to meet the minimum solvency margin ratio
requirements imposed by CIRC and to achieve economies of scale and implement our growth strategy.
In addition, similar to many other insurance products, we have inherent payment obligations in
connection with our insurance products. If we fail to raise sufficient capital, we may not be able to
meet our obligations at maturity or surrender of policies and our business and operations may be
restricted. Financing in the form of equity may also result in dilution of shareholding of our existing
Shareholders. Our inability to raise additional funds in a timely manner and on favorable terms may
have a material adverse effect on our business, financial condition and results of operations.

We had net cash used in operating activities in the three months ended March 31, 2017 and
may not have positive cash flows from operating activities in the future.

Our ability to meet our working capital requirements depends in part on our ability to generate
positive cash flows from operating activities. In 2014, 2015 and 2016, we had net cash from operating
activities of RMB119.6 million, RMB300.5 million and RMB853.4 million, respectively. However, we
had net cash used in operating activities of RMB518.1 million in the three months ended March 31,
2017, primarily due to cash used for the redemption of previously outstanding investment-linked
insurance products, which we stopped selling in January 2017 in accordance with a new CIRC
regulation. Excluding the effect of such redemption, we had net cash used in operating activities of
RMB82.2 million in the three months ended March 31, 2017, primarily due to significant insurance
operating expenses in the period. We cannot guarantee that we will be able to generate positive cash
flows from our operating activities in the future. Our future cash flows from operating activities will
be influenced by the demand for our products, our ability to control our costs and expenses, general
economic conditions and other factors affecting our operations, many of which are beyond our control.

Adverse market conditions could limit our access to liquidity and increase the cost of capital.
Failure to manage our liquidity and cash flows may materially and adversely affect our
financial conditions and results of operations.

Our ability to access liquidity may be limited to our future financial performance as well as a
number of factors outside of our control, such as government regulatory changes, general market

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RISK FACTORS

conditions for capital raising activities, the availability of bank liquidity in general and the economic
and political environment in and outside of China. If these sources of funding are not available to us
on a regular basis, on reasonable term, or at all, we may be required to reduce or suspend our business
activities. In the event that we have to downsize our operating scale due to lack of cash flows, our
financial condition, results of operations and liquidity position would be materially and adversely
affected.

Seasonal fluctuations in business activities may materially and adversely affect our cash
flows, results of operations and financial condition.

We experience seasonality in our business, reflecting a combination of traditional insurance


seasonality patterns and new patterns associated with online business in the ecosystems we partner
with. For example, we generally experience less consumer traffic and purchase orders during national
holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each
year. On the other hand, e-commerce companies in China hold special promotional campaigns on
Double 11 Shopping Festival. As a significant portion of our sales rely on the platforms of various
e-commerce players, the purchase orders of our insurance products dramatically increase during such
period every year. Furthermore, sales in commercial industries generally are significantly higher in the
fourth quarter of each calendar year than in the preceding three quarters. Overall, the historical
seasonality of our business has been relatively mild due to the rapid growth we have experienced and
may increase further in the future. Our financial condition and results of operations for future periods
may continue to fluctuate. As a result, the trading price of our H Shares may fluctuate from time to
time due to seasonality.

We may not receive sustainable government grants.

We have historically received grants and subsidies from the PRC government, which include,
among others, rental subsidies, development support funds and government subsidies related to
intangible assets. In 2014, 2015 and 2016 and the three months ended March 31, 2016 and 2017, we
recorded government grants of RMB15.4 million, RMB26.5 million, RMB46.5 million, RMB0.1
million and RMB0.2 million, respectively. The government grants are subject to the sole discretion of
the relevant governmental authorities and are subject to change and termination. We expect that
government grants received by us are likely to decrease a few years after our establishment. Therefore,
we cannot assure you that we will continue to receive government grants in similar amounts as we
received during the Track Record Period, or at all.

Regulatory actions, legal proceedings and customer complaints against us could harm our
reputation and have a material adverse effect on our business, results of operations, financial
condition and prospects.

We were involved in litigations and other disputes in the ordinary course of our business, which
include lawsuits, arbitration, regulatory proceedings and other disputes relating to our insurance
products and sales and customer services carried out by our employees and third-party partners. See
“Business—Legal and Regulatory Proceedings and Compliances” for further information. Along with
growth and expansion of our business, we may be involved in litigations, regulatory proceedings and
other disputes arising outside the ordinary course of our business. See “Business—Legal and

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RISK FACTORS

Regulatory Proceedings and Compliance” and “Business—Employees” for further information. Such
litigations and disputes may result in claims for actual damages, freezing of our assets and diversion
of our management’s attention, as well as legal proceedings against our Directors, officers or
employees, and the probability and amount of liability, if any, may remain unknown for long periods
of time. Given the uncertainty, complexity and scope of many of these litigation matters, their outcome
generally cannot be predicted with any reasonable degree of certainty. Therefore, our reserves for such
matters may be inadequate. As a result, any unfavorable final resolution of pending litigation matters,
including substantial liabilities arising from lawsuit judgments, could have a material adverse effect
on our business, results of operations and financial condition. Moreover, even if we eventually prevail
in these matters, we could incur significant legal fees or suffer significant reputational harm, which
could have a material adverse effect on our prospects and future growth, including our ability to attract
new customers, retain current customers, expand our partnership with existing or new business
partners and recruit and retain employees and agents.

Defects related to certain of our leased properties may adversely affect our ability to use
these properties.

As of March 31, 2017, we operated our businesses through 18 leased properties in Shanghai,
Hangzhou, Beijing, Shenzhen and Guangzhou in China. Our leased properties in China primarily serve
as our offices, research and development centers, and customer service centers. Our leased properties
have a total gross floor area of approximately 22,614.68 square meters. As of March 31, 2017, we
failed to register 13 leases with a total gross floor area of approximately 15,811.85 square meters,
accounting for 69.9% of all the gross floor we leased, primarily due to the difficulty of cooperating
with the lessors to register such leases. Though we are in the process of registering the required leases
with the local branch of the Ministry of Housing and Urban Development of the PRC, there is no
assurance that this will be completed in a timely manner. Our PRC Legal Advisor has advised us that
the lack of registration of the lease contracts will not affect the validity of the lease agreements under
PRC law, and has also advised us that a maximum penalty of RMB10,000 may be imposed for
non-registration of each lease. The estimated total maximum penalty is RMB130,000. In addition, as
of March 31, 2017, five owners of our leased properties failed to provide relevant title certificate.
Those properties had a total gross floor area of approximately 8,616.36 square meters, accounting for
38.10% of all the gross floor we leased. For details, please see “Business — Properties.”

Any dispute or claim in relation to the titles of the properties that we occupy, including any
litigation involving allegations of illegal or unauthorized use of these properties, could require us to
relocate our business operations occupying these properties. If any of our leases are terminated or
voided as a result of challenges from third parties or the government or if the lease is otherwise not
renewed by our landlords upon expiration, we would need to seek alternative premises and incur
relocation costs. Furthermore, there can be no assurance that the PRC Government will not amend or
revise existing property laws, rules or regulations to require additional approvals, licenses or permits,
or impose stricter requirements on us to obtain or maintain relevant title certificates for the properties
that we use.

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RISK FACTORS

RISKS RELATING TO OUR INDUSTRY

The Insuretech industry is emerging, rapidly evolving based on disruptive technology that
may not be successful in the future.

The Insuretech industry in China is a relatively new and rapidly evolving industry characterized
by frequent changes in market demand and evolving industry practices. Insuretech is reshaping the
traditional insurance market with extensive use of advanced technologies in the insurance sector,
enabling new insurance products, services and processes. Our Company adopted advanced
technologies and an innovative business model in the Insuretech industry in China, and is still
undergoing the revolutionary stage with uncertainties that are difficult to predict.

Our online-centric approach for selling our Insuretech products and our technology components
in integrating our strategies in serving the needs of customers in their daily lives are disruptive and
have not been well acknowledged by customers and business players in China. As a result, we face
pressure in converting customers who believe in traditional insurance as reliable protection. For new
customers who have purchased our products through either our ecosystem partners’ platforms or our
own platforms, due to our limited operating history, we cannot assure you that we are able to
accurately predict how long those customers will engage in purchasing our insurance products so that
we could adjust our service and strategies to maintain those customers, and whether they will opt in
traditional insurance products versus our products and solutions in the future.

Our future results of operations will depend on numerous factors affecting the development of
the Insuretech industry in China, which may be beyond our control. These factors include:

• the growth of internet, personal computer and mobile penetration and usage in China, and
the rate of any such growth;

• the trust and confidence level of online ecosystem customers in China, as well as changes
in customer demographics and consumer tastes and preferences;

• the selection, price and popularity of insurance products that we and our competitors offer
online;

• whether alternative distribution channels or business models that better address the needs
of consumers emerge in China; and

• the development of fulfilment, payment and other ancillary services associated with the
online insurance business.

A decline in the popularity of online activities in general, or any failure by us to adapt the
distribution channels, including our website, and improve the online experience of our customers in
response to trends and consumer requirements, may adversely affect the rate of growth of the
Insuretech market and thus affect our performance and business prospects as a key player in such
market.

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RISK FACTORS

The Insuretech industry is highly competitive.

Our businesses operate in the highly competitive Insuretech industry. We believe that our future
success will depend in part on our ability to continue to uncover market needs and to offer related
services that meet the evolving industry practices on a timely and cost-effective basis. We may not
always be able to successfully identify new market needs and develop and introduce new products and
solutions to our ecosystem partners and customers in a timely and cost-effective manner, which could
have a material and adverse effect on our business and results of operations.

In addition, we operate in the ecosystem-oriented sub-segment of the Insuretech market, which


is even more nascent and we have accounted for only a small percentage of the Insuretech market. The
ecosystem-oriented market is very fragmented as increasingly more traditional insurers are entering
this market. Although we are the leader among the few online only insurance companies, we only
accounted for 17% of this sub-segment and 0.9% of the PRC Insuretech market in 2016 according to
the Oliver Wyman Report.

The rate of growth of the Insuretech market may not be as high or as sustainable as we
anticipate.

Since the inception of our Company, we experienced rapid growth as the first online insurance
company in China and the first to address and have a leading market position in the
ecosystem-oriented Insuretech market. However, the long-term viability and prospects of Insuretech
market in China remain relatively untested. We expect the Insuretech market in China to expand and
the penetration rate to rise with the continued growth of the Chinese economy and disposable income,
the reform of the social welfare system, demographic changes and the regulatory changes by Chinese
authorities. Our judgments regarding the anticipated drivers of such growth and their impact on the
Insuretech industry in China are prospective. We cannot assure you that such prospective judgments
will be consistent with actual developments.

If we cannot effectively respond to the increasing competition in the PRC insurance industry,
our profitability and market share could be materially and adversely affected.

We face intense competition from both domestic and foreign insurance companies. Our primary
competitors are domestic traditional insurance companies. With the gradual opening up of the PRC
insurance market, we also face increasing competition from foreign-invested insurance companies.
Some of our competitors may have advantages over us in one or more areas, such as financial strength,
management capabilities, resources, operating experience, market share, distribution channels and
capabilities in pricing, underwriting and claim settlement. In addition, we face potential competition
from commercial banks, some of which have reportedly obtained approvals to invest in, or form
alliances with, existing insurance companies to offer insurance products and solutions that compete
against those offered by us. These commercial banks may also establish subsidiaries of their own to
engage in insurance business directly. Such potential competitors may further increase the competitive
pressures we experience.

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RISK FACTORS

Our competitiveness depends on a number of factors, including our:

• brand name and reputation;

• product mix and features;

• scope of distribution and cooperative arrangements;

• quality of service;

• risk management and internal control;

• pricing techniques and price;

• investment performance and perceived financial strength;

• ability to innovate; and

• claim settlement ability.

A decline in our competitive position as to one or more of these factors may materially and
adversely affect our results of operations, financial condition and business prospects, including
reducing our market share, losing our existing customers, impairing our ability to attract new
customers and decreasing our profitability.

Government regulations, measures and policies in response to internet insurance and internet
financial service businesses may materially and adversely affect our business.

Due to the relatively short history of the Insuretech and internet financial service industries in
China, the PRC government has not adopted a clear regulatory framework to regulate these industries.
As the first Chinese online insurance company that is permitted by Chinese law and the relevant
regulatory authority to engage in internet insurance business in China, our internet insurance license
was granted on a special approval basis instead of a regular approval basis under the framework of
the existing laws. Therefore, we cannot assure you that the PRC regulatory authority will not revoke
such special approval or grant such special approval to a large number of companies in the near future,
the occurrence of either of which may have a material adverse impact on our business, financial
condition and prospects.

Currently, we do not need additional licenses or permits to operate our existing business in
property, casualty insurance and credit guarantee insurance. However, new applicable laws and
regulations and new interpretation to the existing laws and regulations may be adopted from time to
time to address new issues that arise, and additional licenses and permits may be required as the
relevant government authorities issue and implement additional regulations with respect to these

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RISK FACTORS

industries. As a result, we face substantial uncertainties regarding the evolution of the regulatory
system and the interpretation and implementation of the current and any future PRC laws and
regulations applicable to our business. We cannot guarantee that our current practice and operations
will not be challenged by any relevant authorities if they interpret any current laws or regulations in
a different way or change their policies so as to conflict with the ones we are complying with now.
Also, if any new PRC regulations promulgated in the future require us to obtain additional licenses
or permits in order to continue to conduct our business operations, we cannot guarantee you that we
will immediately meet all the new requirements of such new regulations in order to obtain such
licenses or permits in a timely fashion. The occurrence of any circumstance described above may
materially and adversely affects our business, financial condition and prospects.

Our businesses are subject to regulation and administration by the CIRC, and failure to
comply with any applicable regulations and rules by us or our ecosystem partners could
result in financial losses or harm to our business. Change in laws and regulations may reduce
our profitability and limit our growth.

We are subject to the PRC Insurance Law and related rules and regulations. Our businesses in
property, casualty insurance and other insurance areas are extensively regulated by the CIRC, which
has been given wide discretion in its administration of these laws, rules and regulations as well as the
authority to impose regulatory sanctions on us. Under the amendments to the PRC Insurance Law
promulgated in 2009, the CIRC has been granted greater regulatory oversight over the PRC insurance
industry, in part to afford policyholders more protection.

The terms and premium rates of our insurance products are subject to regulations. Changes in
these regulations may affect our profitability on the products we sell. In addition, the evolving laws
and regulations by CIRC may limit our innovative initiatives on product development and design, the
lack of which will affect our growth and development as we aim to achieve. For example, we stopped
selling investment-linked insurance products in January 2017 in accordance with a new CIRC
regulation. We may subject to administrative proceedings regarding our insurance products and related
pricing practices along with the expansion of such business. Please refer to the section headed
“Business—Legal and Regulatory Proceedings and Compliance” in this prospectus for further details.

Failure to comply with any of the laws, rules and regulations to which we are subject could result
in fines, restrictions on business expansion or, in extreme cases, the revocation of a business license,
which could materially and adversely affect us. As some of the laws, rules and regulations that we are
subject to are relatively new, there is uncertainty regarding their interpretation and application. In
addition, the laws, rules and regulations under which we are regulated may change from time to time.
We cannot assure you that future legislative or regulatory changes, including deregulation, would not
have a material adverse effect on our business, results of operations and financial condition.

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RISK FACTORS

Examinations and investigations by the PRC regulatory authorities may result in fines and/or
other penalties that may have a material adverse effect on our reputation, business, results of
operations and financial condition.

As a participant in the insurance industry, we are subject to periodic or ad hoc examinations and
investigations by PRC regulatory authorities in respect of our compliance with PRC laws and
regulations, which may impose fines and/or other penalties on us. From time to time, the CIRC carries
out comprehensive evaluations and inspections of the internal control and financial and operational
compliance of PRC insurance companies in China. For example, in January 2017, we receive an
administrative penalty which imposed a fine of RMB200,000 with regard to our operations in auto
insurance business relating to inappropriate rebate to customers.

The issuance of new accounting standards or future interpretations of existing accounting


standards could adversely affect our operating results.

We prepare our financial statements in accordance with HKFRS. New accounting standards,
amendments and interpretation applicable to us could have a significant effect on our reported results
and might affect our reporting of transactions completed before a change is announced. The issuance
of new accounting standards or future interpretations of existing accounting standards, or changes in
our business practices or estimates, could result in future changes in our revenue recognition or other
accounting policies that could have a material adverse effect on our results of operations. For example,
IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. This new rule is
expected to impact our accounting policies related to revenue recognition, insurance contract
liabilities provision and expense amortization and deferral, thus impacting our statements of
comprehensive income and financial position. Insurers are also required to disclose information about
amounts, judgements and risks arising from insurance contracts. Insurance contracts revenue on the
statement of comprehensive income, which is a key performance indicator, will include different
components compared with its current composition. As a result, we may need to implement system
changes to capture such different components and other information required to be presented in
accordance with IFRS 17, which may incur additional costs. In addition, when the new rule is adopted
and before investors become familiar with the changes, it may be difficult for investors to evaluate
our financial results or compare them with our past results. See Note 2.1 to the Accountant’s Report
included in Appendix I to this prospectus.

Changes in interest rates may materially and adversely affect our profitability.

The profitability of some of the products and investment returns of insurance companies are
highly sensitive to interest rate fluctuations, and changes in interest rates could adversely affect our
investment returns and results of operations. In periods of rising interest rates, while the increased
investment yield will increase the returns on newly added assets in our investment portfolios,
surrenders and withdrawals of existing insurance products may also increase as policyholders seek to
buy products with perceived higher returns. These surrenders and withdrawals may result in cash
payments requiring the sale of invested assets at a time when the prices of those assets are adversely
affected by the increase in market interest rates, potentially resulting in realized investment losses.

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RISK FACTORS

These cash payments to policyholders would result in a decrease in total invested assets and a
potential decrease in net income. Moreover, a rise in interest rates would adversely affect our
shareholders’ equity in the immediate fiscal year due to a decrease in the fair value of our investment
in debt securities.

Conversely, a decline in interest rates could result in reduced investment returns on our newly
added assets and have an adverse impact on our profitability. During periods of declining interest
rates, our average investment yield will decline as our maturing investments, as well as bonds that are
redeemed or prepaid to take advantage of the lower interest rate environment, are replaced with new
investments carrying lower yields, which would adversely affect our profitability. Historically, in light
of the global financial crisis that unfolded in 2008 and continued during 2009, the PBOC has reduced
the benchmark interest rate on one-year term deposits several times, from 4.14% in December 2007
to 2.25% in December 2008, in an effort to bolster the economy. The PRC government may take
further measures in response to changes in the macroeconomic environment, including further
reducing interest rates, which may reduce our return on investments and materially and adversely
affect our results of operations.

Our exposure to interest rate risk primarily relates to the interest income generated by excess
cash, which is mostly held in interest-bearing bank deposits. We have not used any derivative financial
instruments to manage our interest risk exposure. Interest-earning instruments carry a degree of
interest rate risk. We have not been exposed, nor do we anticipate being exposed, to material risks due
to changes in interest rates. However, our future interest income may be lower than expected due to
changes in market interest rates.

Adverse change in the reinsurance markets or a default by our reinsurers could materially
and adversely affect our results of operations and financial condition.

Our ability to obtain external reinsurance on a timely basis and at reasonable terms is subject to
a number of factors, many of which are beyond our control. If we are unable to renew any expiring
external coverage or obtain acceptable new external reinsurance coverage, our net risk exposure could
increase or, if we are unwilling to bear an increase in net risk exposure, our overall underwriting
capacity and the amount of risk we are able to underwrite could decrease. To the extent that we are
unable to utilize external reinsurance successfully, our business, financial condition and results of
operations may be materially and adversely affected.

In addition, although a reinsurer would be liable to us for the risk transferred pursuant to a
reinsurance arrangement, such an arrangement does not discharge our primary liability to our
policyholders. As a result, we are exposed to credit risk with respect to reinsurers for the business
sessions that involve reinsurance. In particular, a default by one or more of our reinsurers under our
reinsurance arrangements would increase the financial losses arising out of a risk we have insured,
which would reduce our profitability and may have a material adverse effect on our liquidity position.
We cannot assure you that our reinsurers will always be able to meet their obligations under our
reinsurance arrangements on a timely basis, if at all.

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RISK FACTORS

Catastrophic events that are covered by our insurance products could materially increase our
liabilities for claims by policyholders and affect our insurance capacity.

We are exposed to risks of unpredictable liabilities for insurance claim payments arising out of
catastrophic events, which are unpredictable by nature. The frequency and severity of catastrophes are
unpredictable. Catastrophes can be caused by various natural hazards, including hurricanes, typhoons,
floods, earthquakes, severe weather and fires. Catastrophes can also be man-made, such as terrorist
attacks, wars, nuclear explosions and nuclear radiation. In addition, a health epidemic or pandemic
such as severe acute respiratory syndrome or swine flu, etc. can adversely affect our insurance
business. Catastrophes could also result in losses in our investment portfolios due to, among other
things, the failure of our counterparties to perform, or significant volatility or disruption in the
financial markets, which could in turn have a material adverse effect on our business, results of
operations and financial condition.

RISKS RELATING TO DOING BUSINESS IN CHINA

Adverse changes in the PRC economy, political and social conditions, as well as laws and
government policies, may materially and adversely affect our business, financial condition,
results of operations and growth prospects.

The economic, political and social conditions in the PRC differ from those in more-developed
countries in many respects, including structure, government involvement, level of development,
growth rate, control of foreign exchange, capital reinvestment, allocation of resources, rate of
inflation and trade balance position. Before the adoption of its reform and opening up policies in 1978,
the PRC was primarily a planned economy. In recent years, the PRC government has been reforming
the PRC economic system and government structure. For example, the PRC government has
implemented economic reform and measures emphasizing the utilization of market forces in the
development of the PRC economy in the past three decades. Economic reform measures, however, may
be adjusted, modified or applied inconsistently from industry to industry or across different regions
of the country.

We cannot predict whether the resulting changes will have any adverse effect on our current or
future business, financial condition or results of operations. Despite these economic reforms and
measures, the PRC government continues to play a significant role in regulating industrial
development, allocation of natural and other resources, production, pricing and management of
currency, and there can be no assurance that the PRC government will continue to pursue a policy of
economic reform or that the direction of reform will continue to be market friendly.

Our ability to successfully expand our business operations in the PRC depends on a number of
factors, including macroeconomic and other market conditions, and credit availability from lending
institutions. Stricter credit or lending policies in the PRC may affect our ability to obtain external
financing, which may reduce our ability to implement our expansion strategies. We cannot assure you
that the PRC government will not implement any additional measures to tighten credit or lending
standards, or that, if any such measure is implemented, it will not adversely affect our future results
of operations or profitability.

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RISK FACTORS

Demand for our services and our business, financial condition and results of operations may be
materially and adversely affected by the following factors:

• political instability or changes in social conditions of the PRC;

• changes in laws, regulations and administrative directives, or the interpretation thereof;

• measures that may be introduced to control inflation or deflation; and

• changes in the rate or method of taxation.

These factors are affected by a number of variables that are beyond our control. The recent rapid
growth of the PRC insurance market in general and Insuretech market in particular may not be
sustainable. The rate of growth of the PRC insurance market and the Insuretech industry may not be
as high or as sustainable as what we have seen in the recent years. In particular, the insurance industry
in the Asia Pacific region may not expand, and a low penetration rate in a given market does not
necessarily mean that a market has growth potential or that we will succeed in increasing our
penetration into that market. In addition, certain of the geographical markets in which we operate may
be or become saturated and exhibit low or no growth in the future. The growth and development of
the Insuretech industry are subject to a number of industry trends and uncertainties that are beyond
our control.

An economic slowdown in the PRC may reduce the demand for our products and solutions
and have a material adverse effect on our results of operations, financial condition and
profitability.

We conduct all our business and generate substantially all our income from our operations in the
PRC. As a result, economic developments in the PRC have a significant effect on our results of
operations and financial condition, as well as our future prospects. The PRC economy has experienced
significant growth in the past several decades. Although such growth has slowed down in recent years,
China still has one of the fastest-growing economies in the world. However, it is unclear whether such
growth is sustainable.

Factors such as consumer, corporate and government spending, business investment, volatility
and strength of the capital markets and inflation all affect the business environment and, ultimately,
the profitability of our business. In addition, future calamities, such as natural disasters, outbreaks of
contagious diseases or social unrest, may cause a decrease in the level of economic activities and
adversely affect economic growth in the PRC, Asia and elsewhere in the world. In an economic
downturn characterized by higher unemployment, lower family income, lower corporate earnings,
lower business investment and lower consumer spending, the demand for our insurance products and
solutions could be adversely affected. In addition, we may experience an elevated incidence of claims
and a large scale of lapses, partial withdrawals or surrenders of policies. Our policyholders may also
choose to defer or stop paying insurance premiums altogether.

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RISK FACTORS

If the PRC economy experiences slower growth or a significant downturn, our business, results
of operations and financial condition may be materially and adversely affected.

Government control of currency conversion and future fluctuation of Renminbi exchange


rates could have a material adverse effect on our results of operations and financial
condition, and may reduce the value of, and dividends payable on, our H Shares in foreign
currency terms.

Substantially all our income, costs and expenses are denominated in Renminbi, which is not
currently a completely freely convertible currency. A portion of these income must be converted into
other currencies to meet our foreign currency obligations, including our payments of declared
dividends, if any, for our H Shares.

Under the PRC’s existing foreign exchange regulations, by complying with certain procedural
requirements, following the completion of the Global Offering, we will be able to undertake current
account foreign exchange transactions, including payment of dividends in foreign currencies without
prior approval from the State Administration of Foreign Exchange. However, the PRC government
may take measures at its discretion in the future to restrict access to foreign currencies for capital
account and current account transactions under certain circumstances. We may not be able to pay
dividends in foreign currencies to our Shareholders if the PRC government restricts access to foreign
currencies for current account transactions. Under existing PRC foreign exchange regulations,
conversion of Renminbi is permitted, without prior approval from the SAFE, for current account
transactions, including profit distributions, interest payments and expenditures from trade-related
transactions, as long as certain procedural requirements are complied with. However, approval from
and registration with the SAFE and other PRC regulatory authorities are required where Renminbi is
to be converted into foreign currency and remitted out of China for capital account transactions, which
includes foreign direct investment and repayment of loans denominated in foreign currencies. These
limitations could affect our ability to obtain foreign exchange through equity financing, or to obtain
foreign exchange for capital expenditures.

Furthermore, the net proceeds from the Global Offering are expected to be deposited overseas
in currencies other than Renminbi until we obtain necessary approvals from relevant PRC regulatory
authorities to convert these proceeds into onshore Renminbi. If the net proceeds cannot be converted
into onshore Renminbi in a timely manner, our ability to deploy these proceeds efficiently may be
affected, as we will not be able to invest these proceeds on RMB-denominated assets onshore or
deploy them in uses onshore where Renminbi is required, which may adversely affect our business,
results of operation and financial condition.

The change in the value of Renminbi against the Hong Kong dollar and other currencies may
fluctuate and is affected by, among other things, changes in China’s political and economic conditions.
From 1994 until July 2005, the conversion of the Renminbi into foreign currencies in the PRC,
including the Hong Kong dollar and U.S. dollar, has been based on fixed rates set by the PBOC. The
PRC government, however, has, with effect from July 21, 2005, reformed the exchange rate regime by
moving into a managed floating exchange regime based on market supply and demand with reference

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RISK FACTORS

to a basket of currencies. On June 19, 2010, the PBOC announced that it intends to further reform the
Renminbi exchange rate regime by enhancing the flexibility of the Renminbi exchange rate. Following
this announcement, the Renminbi had appreciated from approximately RMB6.83 per U.S. dollar to
RMB6.12 per U.S. Dollar as of June 15, 2015. On August 11, 2015, the PBOC further enlarged the
floating band for trading prices in the interbank spot exchange market of Renminbi against the U.S.
dollar to 2.0% around the closing price in the previous trading session, and Renminbi depreciated
against the U.S. dollar by approximately 1.9% as compared to August 10, 2015, and further
depreciated nearly 1.6% on the next day. On November 30, 2015, the Executive Board of the
International Monetary Fund (IMF) completed the regular five-year review of the basket of currencies
that make up the Special Drawing Right (“SDR”) and decided that with effect from October 1, 2016,
Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a
fifth currency, along with the U.S. dollar, the Euro, the Japanese yen, and the British pound. With the
development of the foreign exchange market and progress toward interest rate liberalization and
Renminbi internationalization, the PRC government may in the future announce further changes to the
exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate
significantly in value against the Hong Kong dollar or the U.S. dollar in the future.

Fluctuations of the Renminbi could adversely affect the value of our foreign
currency-denominated investments or any dividends payable on our H Shares, and therefore the price
of our shares. Following the Global Offering, our exposure to risks associated with foreign currency
fluctuations may further increase as the net proceeds from the Global Offering are expected to be
deposited in currencies other than Renminbi until we obtain necessary approvals from relevant PRC
regulatory authorities to convert them into Renminbi. On the other hand, future Renminbi devaluations
could increase our costs and expenses or lead to fluctuations in the exposure of our foreign
currency-denominated liabilities, thereby adversely affecting our profitability.

Dividends received by foreign holders of our H Shares and gains derived from the disposition
of our H Shares by such holders may be subject to PRC taxation.

Individual holders of our H Shares who are foreign nationals are subject to PRC individual
income tax on dividends received from us. Pursuant to the Circular on the Individual Income Tax
Matters after the Repeal of Guo Shui Fa [1993] No. 45 Circular (Guo Shui Han [2011] No. 348) issued
by State Administrative of Taxation on June 28, 2011 (關於國稅發[1993]045號文件廢止後有關個人
所得稅徵管問題的通知), we are required to withhold such tax from dividend payments to foreign
nationals at tax rates ranging from 5% to 20% (usually 10%) depending on the applicable tax treaty
between the PRC and the jurisdiction in which the foreign national resides. Residents of jurisdictions
that have not entered into a tax treaty with the PRC will be subject to a 20% withholding tax on
dividends. See Appendix III “Taxation and Foreign Exchange—Laws and Regulations of the PRC in
respect of Shareholders of the Company—Tax on Dividends” for details. With respect to gains on the
disposal of our H Shares by individuals, under the Individual Income Tax Law, individuals are subject
to tax at a rate of 20% on gains realized on the sale of shares in PRC resident enterprises, but pursuant
to the Circular Declaring That Individual Income Tax Continues to Be Exempted over Income of

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RISK FACTORS

Individuals from Transfer of Shares (Cai Shui Zi [1998] No. 61) (關於個人轉讓股票所得繼續暫免徵
收個人所得稅的通知(財稅字[1998]61號)) issued by the MOF and the SAT on March 30, 1998, income
of individuals derived from the transfer of shares in listed enterprises is exempt from individual
income tax. As of the Latest Practicable Date, no legislation has expressly provided that income of
non-Chinese resident individuals derived from the sale of shares in PRC resident enterprises listed on
overseas stock exchanges, such as our H Shares, is subject to individual income tax, and, in practice,
the taxation administrations do not collect individual income tax on such income. If such tax is
collected in the future, the value of such foreign individual holders’ investments in our H Shares may
be adversely affected.

Under the PRC EIT Law and its implementation rules, a foreign enterprise is generally subject
to enterprise income tax at the rate of 10% with respect to PRC-sourced income, including dividends
received from a PRC company and gains derived from the disposition of equity interests in a PRC
company, subject to further reductions under any special arrangement or applicable treaty between the
PRC and the jurisdiction of the relevant foreign enterprise’s residence. As the PRC EIT Law and its
implementation rules are relatively new, there remains uncertainty as to their interpretation and
application by the PRC tax authorities, including whether and how enterprise income tax on gains
derived by foreign enterprise holders of H Shares may be collected in each case. If such tax is
collected, the value of such foreign enterprise holders’ investments in our H Shares may be adversely
affected.

For additional information, see “Appendix III—Taxation and Foreign Exchange.”

Inflation and increases in labor costs in the PRC could negatively affect our profitability and
growth.

The economy of China has been experiencing significant growth, leading to inflation and
increased labor costs. According to the National Bureau of Statistics of China, the year over year
percentage change in the consumer price index in China was 2.1% in December 2016. China’s overall
economy and the average wage in the PRC are expected to continue to grow. Future increases in
China’ s inflation and material increases in the cost of labor may materially and adversely affect our
profitability and results of operations unless we are able to pass on these costs to our customers by
increasing the prices of our products.

Labor costs in China have risen in recent years as a result of social development and increasing
inflation in China. As of March 31, 2017, we employed approximately 1,700 employees in China. The
increases in labor cost may erode our profitability and materially harm our business, financial
condition and results of operations. Pursuant to the Labor Contract Law, which became effective in
January 2008 amended in December 2012, and its implementation rules effective as of September
2008, employers are subject to stricter requirements in terms of signing labor contracts, minimum
wages, paying remuneration, determining the term of employees’ probation and unilaterally
terminating labor contracts. In the event that we decide to terminate some of our employees or
otherwise change our employment or labor practices, the Labor Contract Law and its implementation

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RISK FACTORS

rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could
adversely affect our business and results of operations. According to the Social Insurance Law, which
became effective on July 1, 2011, and the Administrative Regulations on the Housing Funds,
employees must participate in pension insurance, work-related injury insurance, medical insurance,
unemployment insurance, maternity insurance and housing funds, and the employers must, together
with their employees or separately, pay the social insurance premiums and housing fund contributions
for such employees.

In light of the rapid economic development in China and evolving employment laws and
regulations in China, we expect that our labor costs, including wages and employee benefits, will
continue to increase. In addition, as the interpretation and implementation of the new laws and
regulations are still evolving, our employment practice may not be at all times be deemed in
compliance with the new laws and regulations. If we are subject to severe penalties or incur significant
liabilities in connection with labor disputes or investigation, our business and profitability may be
adversely affected.

The legal system of the PRC is not fully developed, and there are inherent uncertainties that
may affect the protection afforded to our business and our Shareholders.

We are organized under the laws of the PRC. Our business and operations in the PRC are
governed by the PRC legal system that is based on written statutes. Prior court decisions may be cited
for reference but have limited precedential value. Since the late 1970s, the PRC government has
promulgated laws and regulations dealing with economic matters such as securities, shareholders’
rights, foreign investment, corporate organization and governance, commerce, taxation and trade.
However, as these laws and regulations are relatively new and continue to evolve, interpretation and
enforcement of these laws and regulations involve significant uncertainties and different degrees of
inconsistency. Some of the laws and regulations are still in the developmental stage and are therefore
subject to policy changes. Many laws, regulations, policies and legal requirements have only been
recently adopted by PRC central or local government agencies, and their implementation,
interpretation and enforcement may involve uncertainty due to the lack of established practice
available for reference. We cannot predict the effect of future legal developments in the PRC,
including the promulgation of new laws, changes in existing laws or their interpretation or
enforcement, or the preemption of local regulations by national laws. As a result, there is substantial
uncertainty as to the legal protection available to us and our Shareholders. Furthermore, due to the
limited volume of published cases and the nonbinding nature of prior court decisions, the outcome of
dispute resolution may not be as consistent or predictable as in other more developed jurisdictions,
which may limit the legal protection available to us. In addition, any litigation in the PRC may be
protracted and result in substantial costs and the diversion of resources and management attention.

Our operations in the PRC are subject to PRC regulations governing PRC companies. These
regulations contain provisions that are required to be included in the articles of association of PRC
companies and are intended to regulate the internal affairs of these companies. PRC company law and
regulations, in general, and the provisions for the protection of shareholders’ rights and access to
information, in particular, may be considered less developed than those applicable to companies
incorporated in Hong Kong, the United States and other developed countries or regions. In addition,

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RISK FACTORS

PRC laws, rules and regulations applicable to companies listed overseas do not distinguish between
minority and controlling shareholders in terms of their rights and protections. As such, our minority
shareholders may not have the same protections afforded to them by companies incorporated under the
laws of the United States and certain other jurisdictions.

Furthermore, although we will be subject to the Hong Kong Listing Rules and the Hong Kong
Takeovers Code upon the listing of our H Shares on the Hong Kong Stock Exchange, the holders of
H Shares will not be able to bring actions on the basis of violations of the Hong Kong Listing Rules
and must rely on the Hong Kong Stock Exchange to enforce its rules. Moreover, the Hong Kong
Takeovers Code do not have the force of law and provide only standards of commercial conduct
considered acceptable for takeover and merger transactions and share repurchases in Hong Kong.

Disputes between holders of H Shares and us, our Directors, Supervisors, senior officers or
holders of non-listed shares, arising out of our Articles of Association or the rights or obligations
conferred or imposed upon by the PRC Company Law and related rules and regulations concerning our
affairs, including the transfer of our Shares, are to be resolved through arbitration rather than by a
court of law. A claimant may elect to submit a dispute to arbitration organizations in Hong Kong or
the PRC. Awards that are made by the PRC arbitral authorities recognized under the Arbitration
Ordinance of Hong Kong can be enforced in Hong Kong. Hong Kong arbitration awards may be
recognized and enforced by PRC courts, subject to the satisfaction of certain PRC legal requirements.
However, we cannot assure you that any action brought in the PRC by any holder of H Shares to
enforce a Hong Kong arbitral award made in favor of holders of H Shares would succeed.

In addition, according to the PRC Insurance Law and the related regulatory rules, the change of
any shareholder whose capital investment accounts for more than 5% of a limited liability company’s
registered capital, or the change of any shareholder holding more than 5% of a joint stock company’s
shares shall be subject to CIRC’s approval. In the event that an investor holds more than 5% of the
issued shares of a listed insurance company, the insurance company shall obtain CIRC’s approval
within 5 days of such occurrence. The CIRC has the right to request that investors who do not meet
its qualification requirements transfer their shares. Therefore, shareholders holding more than 5%, or
such other percentage as specified by the CIRC, of our issued shares, may be requested to transfer
their shares as a result of their incompliance with CIRC’s requirements and may not be able to exercise
the shareholders’ rights corresponding to such shares.

It may be difficult to effect service of process upon us, our Directors or our executive officers
that reside in the PRC or to enforce against them or us in the PRC any judgments obtained
from non-PRC courts.

We are organized under the laws of the PRC, and substantially all of our business, assets,
operations and subsidiaries are located in the PRC. In addition, all our senior management members
reside in the PRC, substantially all of our assets, and substantially all of the assets of those persons,
are located in the PRC. Therefore, it may be difficult for investors to effect service of process upon
those persons inside the PRC or to enforce against us or them in the PRC any judgments obtained from
non-PRC courts. The PRC does not have treaties providing for the reciprocal recognition and

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RISK FACTORS

enforcement of judgments of courts with the United States, the United Kingdom, Japan and many other
developed countries. Therefore, recognition and enforcement in China of judgments of a court in any
of these jurisdictions in relation to any matter not subject to a binding arbitration provision may be
difficult or even impossible.

Moreover, the legal framework to which our Company is subject is materially different from the
Companies Ordinance or corporate law in the United States and other jurisdictions with respect to
certain areas, including the protection of minority shareholders. In addition, the mechanisms for
enforcement of rights under the corporate governance framework to which our Company is subject are
also relatively undeveloped and untested. However, according to the PRC Company Law, shareholders
may commence a derivative action against the directors, supervisors, officers or any third party on
behalf of a company under certain circumstances.

On July 14, 2006, the Supreme People’s Court of the PRC and the Government of Hong Kong
signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and
Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative
Region Pursuant to Choice of Court Agreements between Parties Concerned (《關於內地與香港特別
行政區法院互相認可和執行當事人協議管轄的民商事案件判決的安排》). Under such an
arrangement, where any designated people’s court in the PRC or any designated Hong Kong court has
made an enforceable final judgment requiring payment of money in a civil and commercial case
pursuant to a choice of court agreement in writing by the parties, any party concerned may apply to
the relevant people’s court in the PRC or Hong Kong court for recognition and enforcement of the
judgment. Although this arrangement became effective on August 1, 2008, the outcome and
effectiveness of any action brought under the arrangement may still be uncertain.

Any failure by us or our third-party service providers to comply with applicable anti-money
laundering laws and regulations could damage our reputation.

In cooperation with our third-party service providers, we have adopted various policies and
procedures, such as “know-your-customer” procedures as one of our internal control measures for
anti-money laundering purposes. In addition, we rely on our third-party service providers to have their
own appropriate anti-money laundering policies and procedures. If any of our third-party service
provides fail to comply with applicable anti-money laundering laws and regulations, our reputation
could suffer and we could become subject to regulatory intervention, which could have a material
adverse effect on our business, financial condition and results of operations.

In July 2015, the PBOC together with other nine PRC regulatory authorities jointly released a
guideline to promote a healthy and steady development of internet finance industry, which requires,
among other things, that internet finance service providers to comply with certain anti-money
laundering requirements, including the establishment of a customer identification program, the
monitoring and reporting of suspicious transactions, the preservation of customer information and
transaction records, and the provision of assistance to the public security department and judicial
authority in investigations and proceedings in relation to anti-money laundering matters. The PBOC
will formulate implementing rules to further specify the anti-money laundering obligations of internet

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RISK FACTORS

finance service providers. We cannot assure you that the anti-money laundering policies and
procedures we have adopted will be effective in protecting our marketplace from being exploited for
money laundering purposes or will be deemed to be in compliance with applicable anti-money
laundering implementing rules if and when adopted.

RISKS RELATING TO THE GLOBAL OFFERING

There has been no previous public market for our H Shares, and the liquidity and market
price of our H Shares may be volatile.

Prior to the Global Offering, there has been no public market for our H Shares. The initial issue
price range for our H Shares resulted from negotiations between us and the Underwriters, and the
Offer Price may differ significantly from the market price for our H Shares following the Global
Offering. We have applied for the listing of, and permission to deal in, our H Shares on the Hong Kong
Stock Exchange. A listing on the Hong Kong Stock Exchange, however, does not guarantee that an
active and liquid trading market for our H Shares will develop or, if it does develop, will be sustained
following the Global Offering or that the market price of our H Shares will not decline following the
Global Offering. Furthermore, the price and trading volume of our H Shares may be volatile. The
following factors may affect the volume and price at which our H Shares will trade:

• actual or anticipated fluctuations in our GWPs and results of operations;

• news regarding the recruitment or loss of key personnel by ourselves or our competitors;

• announcements of competitive developments, acquisitions or strategic alliances in our


industry;

• changes in earnings estimates or recommendations by financial analysts;

• potential litigation or regulatory investigations;

• general market conditions or other developments affecting us or our industry;

• the operating and stock price performance of other companies, other industries and other
events or factors beyond our control; and

• the release of lockup or other transfer restrictions on our outstanding H Shares, or sales or
perceived sales of additional H Shares by us or other shareholders.

Moreover, the securities market has from time to time experienced significant price and volume
fluctuations that were unrelated, or not directly related, to the operating performance of the underlying
companies. These broad market and industry fluctuations may have a material and adverse effect on
the market price and trading volume of our H Shares.

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RISK FACTORS

Future sales or perceived sales or conversion of substantial amounts of our Shares in the
public market, including any future offering of H Shares or conversion of our unlisted Shares
into H Shares, could have a material adverse effect on the prevailing market price of our H
Shares and our ability to raise additional capital in the future, or may result in dilution of
your shareholding.

The market price of our H Shares could decline as a result of future sales or issuances of a
substantial number of our H Shares or other securities relating to our H Shares in the public market,
or the perception that such sales or issuances may occur. Moreover, such future sales or perceived
sales may also adversely affect the prevailing market price of our H Shares and our ability to raise
capital in the future at favorable time and price.

In addition, upon completion of the Global Offering and conversion of the Foreign Shares into
H Shares, we would have two classes of Shares: Domestic Shares and H Shares. Our Domestic Shares
may be converted into H Shares under certain circumstances, subject to the applicable PRC laws,
regulations and approvals, including internal approval and the approval from the relevant PRC
regulatory authorities, and subject to the rules, regulations and procedures of the Hong Kong Stock
Exchange. If a significant number of Domestic Shares are converted into H Shares, the supply of H
Shares may be substantially increased, which could materially and adversely affect the prevailing
market price of our H Shares. Additionally, if any of our unlisted Shares were to be converted and
traded as H Shares on the Hong Kong Stock Exchange, our Shareholders would experience a dilution
in their holdings upon such issuance and listing. Furthermore, if additional funds are raised through
our issuance of new equity or equity-linked securities other than on a pro-rata basis to existing
Shareholders, the percentage ownership for such Shareholders may be reduced. Such new securities
may also confer rights and privileges that take priority over those conferred by the H Shares.

Since there will be a gap of several days between the pricing and trading of our H Shares,
holders of our H Shares are subject to the risk that the price of our H Shares could fall
during the period before the trading of our H Shares begins.

The Offer Price of our H Shares is expected to be determined on the Price Determination Date.
However, our H Shares will not commence trading on the Hong Kong Stock Exchange until they are
delivered, which is expected to be five Hong Kong business days after the pricing date. As a result,
investors may not be able to sell or deal in our H Shares during that period. Accordingly, holders of
our H Shares are subject to the risk that the price of our H Shares could fall before trading begins as
a result of unfavorable market conditions, or other adverse developments, that could occur between
the time of sale and the time trading begins.

Future sales or perceived sales of substantial amounts of our H Shares in the public market
could have a material adverse effect on the prevailing market price of our H Shares and our
ability to raise additional capital in the future.

The market price of our H Shares could decline as a result of substantial future sales of our H
Shares or other securities relating to Shares in the public market. Such a decline could also occur with

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RISK FACTORS

the issuance of new Shares or other securities relating to our Shares, or the perception that such sales
or issuances may occur. Future sales, or perceived sales, of substantial amounts of our Shares could
materially adversely affect the prevailing market price of our H Shares and our ability to raise future
capital at a favorable time and price. Our shareholders would experience a dilution in their holdings
upon the issuance or sale of additional securities for any purpose.

Because the initial public offering price of our H Shares is substantially higher than the
consolidated net tangible book value per share, purchasers of our H Shares in the Global
Offering may experience immediate dilution upon such purchases.

As the Offer Price of our H Shares is higher than the consolidated net tangible assets per share
immediately prior to the Global Offering, purchasers of our H Shares in the Global Offering will
experience an immediate dilution in pro forma adjusted consolidated net tangible assets. Our existing
Shareholders will receive an increase in the pro forma adjusted consolidated net tangible asset value
per share of their shares. In addition, holders of our H Shares may experience further dilution of their
interest if the Underwriters exercise the Over-allotment Option or if we issue additional shares in the
future to raise additional capital.

If securities or industry analysts do not publish research reports about our business, or if
they adversely change their recommendations regarding our H Shares, the market price and
trading volume of our H Shares may decline.

The trading market for our H Shares will be influenced by the research and reports that industry
or securities analysts publish about us or our business. If one or more of the analysts who cover us
downgrade our Shares, the price of our Shares would likely decline. If one or more of these analysts
cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in
the financial markets, which in turn could cause our stock price or trading volume to decline.

Payment of dividends is subject to restrictions under PRC law. There is no assurance whether
and when we will pay dividends.

During the Track Record Period, we have not distributed cash dividends. Under the applicable
PRC laws, dividends may be paid only out of distributable profits. Distributable profits mean, as
determined under PRC GAAP or HKFRS, whichever is lower, our net profits for a period, plus the
distributable profits or net of the accumulated losses, if any, at the beginning of such period, less
appropriations to general risk reserve, transaction risk reserve, statutory surplus reserve (determined
under PRC GAAP) and discretionary surplus reserve (as approved by our shareholders’ meeting). As
a result, we may not have sufficient profit to enable us to make future dividend distributions to our
shareholders, even if one of our financial statements prepared in accordance with PRC GAAP or
HKFRS indicates that our operations have been profitable.

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RISK FACTORS

Certain facts and statistics derived from government and third-party sources contained in
this prospectus may not be reliable.

We have derived certain facts and other statistics in this prospectus, particularly those relating
to the PRC, the PRC economy and the PRC securities industry, from information provided by the PRC
and other government agencies, industry associations, independent research institutes and other
third-party sources. While we have taken reasonable care in the reproduction of the information, it has
not been prepared or independently verified by us, the underwriters or any of our or their respective
affiliates or advisors, and, therefore, we cannot assure you as to the accuracy and reliability of such
facts and statistics, which may not be consistent with other information compiled inside or outside the
PRC. The facts and other statistics include the facts and statistics included in the sections entitled
“Risk Factors,” “Industry Overview” and “Business.” Due to possibly flawed or ineffective collection
methods or discrepancies between published information and market practice and other problems, the
statistics herein may be inaccurate or may not be comparable with statistics produced for other
economies, and you should not place undue reliance on them. Furthermore, we cannot assure you that
they are stated or compiled on the same basis, or with the same degree of accuracy, as similar statistics
presented elsewhere. In all cases, you should consider carefully how much weight or importance you
should attach to or place on such facts or statistics.

You should read the entire document carefully, and we strongly caution you not to place any
reliance on any information contained in press articles or other media regarding us or the
Global Offering.

There may be, subsequent to the date of this prospectus but prior to the completion of the Global
Offering, press and media coverage regarding us and the Global Offering, which may contain, among
other things, certain financial information, projections, valuations and other forward-looking
information about us and the Global Offering. We have not authorized the disclosure of any such
information in the press or media and do not accept responsibility for the accuracy or completeness
of such press articles or other media coverage. We make no representation as to the appropriateness,
accuracy, completeness or reliability of any of the projections, valuations or other forward-looking
information about us. To the extent such statements are inconsistent with, or conflict with, the
information contained in this prospectus, we disclaim responsibility for them. Accordingly,
prospective investors are cautioned to make their investment decisions on the basis of the information
contained in this prospectus only and should not rely on any other information.

You should rely solely upon the information contained in this prospectus, the Global Offering
and any formal announcements made by us in Hong Kong in making your investment decision
regarding our H Shares. We do not accept any responsibility for the accuracy or completeness of any
information reported by the press or other media, nor the fairness or appropriateness of any forecasts,
views or opinions expressed by the press or other media regarding our H Shares, the Global Offering
or us. We make no representation as to the appropriateness, accuracy, completeness or reliability of
any such data or publication. Accordingly, prospective investors should not rely on any such
information, reports or publications in making their decisions as to whether to invest in our Global
Offering. By applying to purchase our H Shares in the Global Offering, you will be deemed to have
agreed that you will not rely on any information other than that contained in this prospectus and the
Global Offering.

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RISK FACTORS

Some facts, forecasts and statistics contained in this prospectus with respect to the PRC,
Hong Kong and their economies and insurance industries are derived from various official or
third-party sources and may not be accurate, reliable, complete or up-to-date, and statistics
in the prospectus provided by Oliver Wyman are subject to assumptions and methodologies
set forth in the “Industry Overview” section of this prospectus.

Some facts, forecasts and statistics in this prospectus relating to the PRC, Hong Kong and their
economies and insurance industries are derived from various official or third-party sources. While we
have exercised reasonable care in compiling and reproducing these facts, forecasts and statistics, they
have not been independently verified by us. Therefore, we make no statement on the accuracy of such
facts, forecasts and statistics, which may not be consistent with other information compiled within or
outside these jurisdictions and may not be complete or up to date. Moreover, the statistics in this
prospectus may be inaccurate or less developed than statistics produced by other economies and
should not be unduly relied upon.

This prospectus contains forward-looking statements relating to our plans, objectives,


expectations and intentions, which may not represent our overall performance for periods of
time to which such statements relate.

This prospectus contains certain statements and information that are “forward-looking” and uses
forward-looking terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “may,”
“ought to,” “should” or “will” or similar terms. Those statements include, among other things, the
discussion of our Company’s growth strategy and expectations concerning our future operations,
liquidity and capital resources. Investors of the H Shares are cautioned that reliance on any
forward-looking statements involves risks and uncertainties and that any or all of those assumptions
could prove to be inaccurate, and, as a result, the forward-looking statements based on those
assumptions could also be incorrect. The uncertainties in this regard include, but are not limited to,
those identified in this section, many of which are not within our Company’s control. In light of these
and other uncertainties, the inclusion of forward-looking statements in this prospectus should not be
regarded as representations by our Company that our plans or objectives will be achieved and
investors should not place undue reliance on such forward-looking statements. Our Company does not
undertake any obligation to update publicly or release any revisions of any forward-looking
statements, whether as a result of new information, future events or otherwise. Please refer to the
section headed “Forward-looking statements” in this prospectus for further details.

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INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

INFORMATION AND REPRESENTATION

You should only rely on the information contained in this prospectus and the Application Forms
to make your investment decision. None of the Company or any of the Relevant Persons has authorised
anyone to provide you with any information or to make any representation that is different from what
is contained in this prospectus. No representation is made that there has been no change or
development reasonably likely to involve a change in our Group’s affairs since the date of this
prospectus or that the information contained in this prospectus is correct as at any date subsequent to
its date.

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus, for which the Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the
Laws of Hong Kong) and the Listing Rules for the purpose of giving information to the public with
regard to our Group.

The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge
and belief the information contained in this prospectus is accurate and complete in all material
respects and not misleading or deceptive, and there are no other matters the omission of which would
make any statement herein or this prospectus misleading.

APPROVALS OF CIRC AND CSRC

We have obtained approvals from the CIRC and the CSRC for the Global Offering and the
making of the application to list the H Shares on the Hong Kong Stock Exchange on June 14, 2017
and June 29, 2017, respectively. In granting such approval, neither the CIRC nor the CSRC accepts
any responsibility for the financial soundness of our Group or the accuracy of any of the statements
made or opinions expressed in this prospectus or the Application Forms.

As advised by our PRC Legal Advisers, our Company has obtained all necessary approvals and
authorisations in the PRC in relation to the Listing.

APPLICATION FOR LISTING ON THE STOCK EXCHANGE

We have applied to the Listing Committee for the granting of the listing of, and permission to
deal in, our H Shares in issue and to be issued pursuant to the Global Offering (including the
additional H Shares which may be issued pursuant to the exercise of the Over-allotment Option), on
the basis that, among other things, we satisfy the market capitalization/revenue test under Rule 8.05(3)
of the Listing Rules with reference to (i) our total income for the year ended December 31, 2016, being
approximately RMB3,412.7 million (equivalent to approximately HK$4,077.9 million), is over
HK$500 million; and (ii) our expected market capitalization at the time of Listing, which based on the
low-end of the indicative Offer Price range, exceeds HK$4 billion.

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INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

Save as disclosed in this prospectus, no part of the Shares is listed or dealt in on any other stock
exchange and no such listing or permission to list is being or is proposed to be sought in the near
future.

H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Subject to the granting of listing of, and permission to deal in, the H Shares on the Hong Kong
Stock Exchange and our compliance with the stock admission requirements of HKSCC, the H Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with
effect from the date of commencement of dealings in the H Shares on the Hong Kong Stock Exchange
or any other date as determined by HKSCC. Settlement of transactions between participants of the
Hong Kong Stock Exchange is required to take place in CCASS on the second Business Day after any
trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time. Investors should seek the advice of their
stockbroker or other professional advisers for the details of the settlement arrangements as such
arrangements may affect their rights and interests. All necessary arrangements have been made by us
for the H Shares to be admitted into CCASS.

RESTRICTIONS ON THE OFFER AND SALE OF THE OFFER SHARES

Each person subscribing for the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to confirm, or by his/her subscription of the Hong Kong Offer Shares be deemed to
confirm, that he/she is aware of the restrictions on the offering and sales of the Offer Shares described
in this prospectus.

No action has been taken to permit a public offering of the Offer Shares in any jurisdiction other
than in Hong Kong, or the distribution of this prospectus and/or the related Application Forms in any
jurisdiction other than Hong Kong. Accordingly, this prospectus and/or the related Application Forms
may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction
or in any circumstances in which such an offer or invitation is not authorised or to any person to whom
it is unlawful to make such an offer or invitation. The distribution of this prospectus and/or the related
Application Forms and the offering and sale of the Offer Shares in other jurisdictions are subject to
restrictions and may not be made except as permitted under the applicable securities laws of such
jurisdictions pursuant to registration with or authorisation by the relevant securities regulatory
authorities or an exemption therefrom.

The Offer Shares are offered for subscription solely on the basis of the information contained and
representations made in this prospectus and the related Application Forms, and on the terms and
subject to the conditions set out herein and therein. No person is authorised in connection with the
Global Offering to give any information, or to make any representation, not contained in this
prospectus, and any information or representation not contained in this prospectus must not be relied
upon as having been authorised by the Company or any of the Relevant Persons. For further details
of the structure of the Global Offering, including its conditions, and the procedures for applying for
the Hong Kong Offer Shares, please see “Structure of the Global Offering” and “How to Apply for
Hong Kong Offer Shares”.

— 92 —
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

UNDERWRITING

The listing of the H Shares on the Hong Kong Stock Exchange is sponsored by the Joint
Sponsors. The Global Offering is managed by the Joint Global Coordinators. The Hong Kong Public
Offering is fully underwritten by the Hong Kong Underwriters listed in the section headed
“Underwriting”, subject to an agreement on the Offer Price between the Company and the Joint Global
Coordinators (on behalf of the Underwriters). The International Offering is expected to be fully
underwritten by the International Underwriters. For further details about the Underwriters and the
underwriting arrangements, see “Underwriting”.

DETERMINATION OF THE OFFER PRICE

The Offer Shares are being offered at the Offer Price which will be determined by our Company
and the Joint Global Coordinators (on behalf of the Underwriters) on or around Thursday, September
21, 2017 and in any event no later than Friday, September 22, 2017.

If the Joint Global Coordinators (on behalf of the Underwriters) and our Company are unable to
reach an agreement on the Offer Price on or before Friday, September 22, 2017, or such later date or
time as may be agreed between the Joint Global Coordinators (on behalf of the Underwriters) and our
Company, the Global Offering will not become unconditional and will lapse.

STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING

Particulars of the structure of the Global Offering, including its conditions, and details of the
arrangements relating to the Over-allotment Option and the stabilisation are set out in “Structure of
the Global Offering” and “Underwriting — Stabilization”, respectively.

PROCEDURES FOR THE APPLICATION OF HONG KONG OFFER SHARES

The procedures for applying for the Hong Kong Offer Shares are set out in “How to Apply for
Hong Kong Offer Shares” and the Application Forms.

PROFESSIONAL TAX ADVICE RECOMMENDED

If you are unsure about the taxation implications of subscribing for, purchasing, holding,
disposing of, or dealing in the H Shares or exercising any rights attached to them, you should consult
an expert. It is emphasised that neither the Company nor any of the Relevant Persons accepts
responsibility for any tax effects on, or liabilities of, any person resulting from subscribing for,
purchasing, holding, disposing of, or dealing in the H Shares or exercising any rights attached to them.

— 93 —
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

REGISTER OF MEMBERS AND STAMP DUTY

All of the H shares issued pursuant to applications made in Global Offering will be registered
on our H Share register to be maintained in Hong Kong by the H Share Registrar, Tricor Investor
Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong. Our principal
register of members will be maintained by us at our head office in the PRC.

Dealings in the H Shares registered on our H Share register will be subject to the Hong Kong
stamp duty.

Unless determined otherwise by us, dividends payable in Hong Kong dollars in respect of H
Shares will be paid to the Shareholders listed on our H Share register in Hong Kong, by ordinary post,
at the Shareholders’ risk, to the registered address of each Shareholder.

REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES

We have instructed Tricor Investor Services Limited, the H Share Registrar, and it has agreed,
not to register the subscription, purchase or transfer of any H Shares in the name of any particular
holder unless and until the holder delivers to the H Share Registrar a signed form in respect of those
H Shares bearing statements to the effect that the holder:

(i) agrees with us and each of the Shareholders, and we agree with each Shareholder, to
observe and comply with the PRC Company Law, the Special Regulations and the Articles
of Association;

(ii) agrees with us, each of the Shareholders, Directors, Supervisors, managers and officers, and
we acting for ourselves and for each of the Directors, Supervisors, managers and officers
agree with each of the Shareholders to refer all differences and claims arising from the
Articles of Association or any rights or obligations conferred or imposed by the PRC
Company Law or other relevant laws and administrative regulations concerning our affairs
to arbitration in accordance with the Articles of Association, and any reference to
arbitration shall be deemed to authorise the arbitration tribunal to conduct hearings in open
session and to publish its award. Such arbitration shall be final and conclusive;

(iii) agrees with us and each of the Shareholders that the H Shares are freely transferable by the
holders thereof; and

(iv) authorises us to enter into a contract on his or her behalf with each of the Directors,
Supervisors, managers and officers whereby such Directors, Supervisors, managers and
officers undertake to observe and comply with their obligations to the Shareholders as
stipulated in the Articles of Association.

— 94 —
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

COMMENCEMENT OF DEALING IN THE H SHARES

Dealing in the H Shares on the Hong Kong Stock Exchange is expected to commence on
Thursday, September 28, 2017. The H Shares will be traded in board lot of 100 H Shares each.

MARKET SHARE DATA

The statistical and market share information contained in this prospectus has been derived from
official government publications, market data providers and other independent third party sources. We
believe that sources of the information are appropriate sources for such information and have
reproduced the data and statistics extracted from such official government publications and other
sources in a reasonably cautious manner. We have no reasons to believe that such information is false
or misleading or that any fact has been omitted that would render such information false or misleading.
While we have exercised reasonable care in compiling and reproducing such information unless
otherwise indicated, the information has not been verified by us independently. This statistical
information may not be consistent without statistical information from other sources within or outside
the PRC. You should not unduly rely on such information.

CURRENCY TRANSLATIONS

Unless otherwise specified, amounts denominated in RMB and US$ have been translated, for the
purpose of illustration only, into Hong Kong dollars in this prospectus at the following rates:

HK$1.00 : RMB0.83687 (set by the PBOC for foreign exchange transactions prevailing
on September 13, 2017)

US$1.00 : HK$7.8112 (based on the exchange rate set forth in the H.10 weekly
statistical release of the Federal Reserve Board of the United
States on September 8, 2017)

No representation is made that any amounts in RMB, US$ or HK$ can or could have been at the
relevant dates converted at the above rates or any other rates or at all.

— 95 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Position Address Nationality

Yaping Ou (歐亞平) . . Chairman of the Board House No. 3 Chinese


and executive Director Mt Kellett View Town Houses (Hong Kong)
65-69 Mt Kellett Road
The Peak
Hong Kong

Jin Chen (陳勁) . . . . . Executive Director and Room 102 Chinese


chief executive officer No. 12, Lane 333, Yelian Road
Qingpu District
Shanghai
PRC

Xinyi Han (韓歆毅). . . Non-executive 22nd Floor Chinese


Director No. 5 Star Street,
Wanchai
Hong Kong

Jimmy Chi Ming Lai Non-executive Flat A, 1/F, Blk T1 Rainbow Lodge, Chinese
(賴智明) . . . . . . . . . Director 9 Ping Shan Lane Yuen Long, NT (Hong Kong)
Hong Kong

Guoping Wang Non-executive 4/F, Baohua Court Chinese


(王國平) . . . . . . . . . Director Jiabaotian Gardens
Lowu District
Shenzhen
PRC

Xiaoming Hu Non-executive Room 1002, Unit 1 Chinese


(胡曉明) . . . . . . . . . Director Block 16, Yitian Plaza
Binjiang District
Hangzhou
PRC

Fang Zheng (鄭方) . . . Non-executive Room F, 61/F, Tower 6 Chinese


Director The Belcher’s,
Pokfulam
Hong Kong

Hugo Jin Yi Ou Non-executive Flat A, 2/F, Fortuna Court Chinese


(歐晉羿) . . . . . . . . . Director 25 Repulse Bay Road (Hong Kong)
Hong Kong

Shuang Zhang (張爽) . Independent 911 Tilman Rd Chinese


non-executive Director Charlottesville, VA 22901
United States of America

— 96 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Position Address Nationality

Hui Chen (陳慧) . . . . . Independent 32-C, No. 2, Lane 100 Chinese


non-executive Director Xingong Road, Xuhui District
Shanghai
PRC

Li Du (杜力) . . . . . . . . Independent 9/F, Tower B Chinese


non-executive Director 8 Mount Nicholson Road (Hong Kong)
Happy Valley
Hong Kong

Yifan Li . . . . . . . . . . . Independent 103 Claridge Ct Apt 4 American


non-executive Director Princeton NJ 08540-7033
United States of America

Ying Wu (吳鷹) . . . . . Independent 3002, 11/F Chinese


non-executive Director 8 Chaoyang Gongyuan South Road
Chaoyang District
Beijing
PRC

Yuping Wen (溫玉萍) . Supervisor 3206(C) Chinese


No. 6 Building
Xiangshanli Garden (second phase)
Overseas Chinese Town
Nanshan District
Shenzhen
PRC

Baoyan Gan (干寶雁) . Supervisor Room 601 Chinese


No. 1, Lane 1269
Zhangyang Road
Shanghai
PRC

Lei Xiang (向雷). . . . . Supervisor Room 1401, Unit 3, Block C Chinese


Guanhaitai Garden
Nanshan District
Shenzhen
PRC

Further information is disclosed in the section headed “Directors, Supervisors and Senior
Management” in this prospectus.

— 97 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Joint Sponsors J.P. Morgan Securities (Far East) Limited


28/F, Chater House
8 Connaught Road
Central
Hong Kong

Credit Suisse (Hong Kong) Limited


L88, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

UBS Securities Hong Kong Limited


42/F, One Exchange Square
8 Connaught Place
Central
Hong Kong

CMB International Capital Limited


Units 1803-4, 18/F
Bank of America Tower
12 Harcourt Road
Central
Hong Kong

Joint Global Coordinators J.P. Morgan Securities (Asia Pacific) Limited


28/F, Chater House
8 Connaught Road
Central
Hong Kong

Credit Suisse (Hong Kong) Limited


L88, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

UBS AG Hong Kong Branch


52/F, Two International Finance Centre
8 Finance Street
Central
Hong Kong

— 98 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

CMB International Capital Limited


Units 1803-4, 18/F
Bank of America Tower
12 Harcourt Road
Central
Hong Kong

Joint Bookrunners J.P. Morgan Securities (Asia Pacific) Limited


(in relation to the Hong Kong Public Offering only)
28/F, Chater House
8 Connaught Road
Central
Hong Kong

J.P. Morgan Securities plc


(in relation to the International Offering only)
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom

Credit Suisse (Hong Kong) Limited


L88, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

UBS AG Hong Kong Branch


52/F, Two International Finance Centre
8 Finance Street
Central
Hong Kong

CMB International Capital Limited


Units 1803-4, 18/F
Bank of America Tower
12 Harcourt Road
Central
Hong Kong

China International Capital Corporation Hong Kong


Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong

— 99 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Ping An of China Securities (Hong Kong) Company


Limited
28/F, 169 Electric Road, North Point, Hong Kong

Morgan Stanley Asia Limited


(in relation to the Hong Kong Public Offering only)
46/F, International Commerce Centre, 1 Austin Road
West, Kowloon, Hong Kong

Morgan Stanley & Co. International plc


(in relation to the International Offering only)
25 Cabot Square, Canary Wharf, London, E14 4QA

ICBC International Capital Limited


37/F, ICBC Tower
3 Garden Road
Hong Kong

BOCI Asia Limited


26th Floor, Bank of China Tower
1 Garden Road
Hong Kong

ABCI Capital Limited


11/F, Agricultural Bank of China Tower
50 Connaught Road
Central, Hong Kong

Joint Lead Managers J.P. Morgan Securities (Asia Pacific) Limited


(in relation to the Hong Kong Public Offering only)
28/F, Chater House
8 Connaught Road
Central
Hong Kong

J.P. Morgan Securities plc


(in relation to the International Offering only)
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom

Credit Suisse (Hong Kong) Limited


L88, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

— 100 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

UBS AG Hong Kong Branch


52/F, Two International Finance Centre
8 Finance Street
Central
Hong Kong

CMB International Capital Limited


Units 1803-4, 18/F
Bank of America Tower
12 Harcourt Road
Central
Hong Kong

China International Capital Corporation Hong Kong


Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong

Ping An of China Securities (Hong Kong) Company


Limited
28/F,169 Electric Road, North Point, Hong Kong

Morgan Stanley Asia Limited


(in relation to the Hong Kong Public Offering only)
46/F, International Commerce Centre, 1 Austin Road
West, Kowloon, Hong Kong

Morgan Stanley & Co. International plc


(in relation to the International Offering only)
25 Cabot Square, Canary Wharf, London, E14 4QA

ICBC International Securities Limited


37/F, ICBC Tower
3 Garden Road
Hong Kong

BOCI Asia Limited


26th Floor, Bank of China Tower
1 Garden Road
Hong Kong

ABCI Securities Company Limited


10/F, Agricultural Bank of China Tower
50 Connaught Road
Central, Hong Kong

— 101 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Head & Shoulders Securities Limited


Room 2511, 25/F, Cosco Tower
183 Queen’s Road Central
Hong Kong

Futu Securities International (Hong Kong) Limited


11/F Bangkok Bank Building
14-20 Bonham Strand West
Sheung Wan, Hong Kong

Essence International Securities (Hong Kong) Limited


39/F., One Exchange Square, Central, Hong Kong

Legal Advisors to the Company As to Hong Kong and U.S. laws:

Skadden, Arps, Slate, Meagher & Flom and affiliates


42nd Floor, Edinburgh Tower
The Landmark
15 Queen’s Road Central
Hong Kong

As to PRC laws:

Grandall Law Firm (Shanghai)


23-25/F, Garden Square
968 West Beijing Road
Shanghai 200041
P.R. China

Legal Advisors to the Joint Sponsors As to Hong Kong and U.S. laws:
and the Underwriters
Cleary Gottlieb Steen & Hamilton (Hong Kong)
37/F Hysan Place
500 Hennessy Road
Causeway Bay
Hong Kong

As to PRC laws:

Han Kun Law Offices


9/F, Office Tower C1
Oriental Plaza, 1 East Chang An Avenue
Beijing
China

— 102 —
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Reporting Accountant PricewaterhouseCoopers


22/F Prince’s Building
Central
Hong Kong

Compliance Adviser Somerley Capital Limited


20/F, China Building
29 Queen’s Road Central
Central
Hong Kong

Receiving Bank Bank of China (Hong Kong) Limited


1 Garden Road
Hong Kong

— 103 —
CORPORATE INFORMATION

Registered Office, Headquarters and 4-5/F, Associate Mission Building


Principal Place of Business in 169 Yuanmingyuan Road
the PRC Shanghai
PRC

Principal Place of Business in Level 54, Hopewell Centre


Hong Kong 183 Queen’s Road East
Hong Kong

Joint Company Secretaries Yongbo Zhang


Room 302
No. 78, Lane 100, Wanding Road
Minhang District
Shanghai
PRC

Ella Wai Yee Wong (HKICS; ICSA)


Level 54, Hopewell Centre
183 Queen’s Road East
Hong Kong

Authorised Representatives Jin Chen


Room 102,
No. 12, Lane 333, Yelian Road
Qingpu District
Shanghai
PRC

Ella Wai Yee Wong


Level 54, Hopewell Centre
183 Queen’s Road East
Hong Kong

Audit Committee Hui Chen (Chairman)


Guoping Wang
Yifan Li

Risk Management Committee Fang Zheng (Chairman)


Xiaoming Hu
Ying Wu

Remuneration and Nomination Shuang Zhang (Chairman)


Committee Yaping Ou
Li Du

— 104 —
CORPORATE INFORMATION

Investment Strategy Committee Jin Chen (Chairman)


Xinyi Han
Jimmy Chi Ming Lai
Hugo Jin Yi Ou

Principal Banks ICBC Shanghai Branch Sales Department


No. 24, Dong Yi Road
Huangpu District
Shanghai
PRC

CITIC Bank Shanghai Branch Sales Department


Aurora International Building
No. 99 Fucheng Road
Pudong District
Shanghai
PRC

H Share Registrar Tricor Investor Services Limited


Level 22, Hopewell Centre
183 Queen’s Road East
Hong Kong

Company’s Website https://www.zhongan.com/


(The information on the website does not form part of
this prospectus)

— 105 —
INDUSTRY OVERVIEW

Certain information, including statistics and estimates, set forth in this section and elsewhere
in this prospectus has been derived from an industry report commissioned by us and independently
prepared by Oliver Wyman in connection with the Global Offering. We believe that the sources of
such information are appropriate, and we have taken reasonable care in extracting and reproducing
such information. We have no reason to believe that such information is false or misleading in any
material respect or that any fact has been omitted that would render such information false or
misleading in any material respect. However, neither we nor any other party involved in the Global
Offering has independently verified such information, and neither we nor any other party involved
in the Global Offering makes any representation as to the accuracy or completeness of such
information. Therefore, investors are cautioned not to place any undue reliance on the information,
including statistics and estimates, set forth in this section or similar information included
elsewhere in this prospectus. For a discussion of risks relating to our industry, please refer “Risk
Factors — Risks Relating to Our Industry.”

SOURCE OF INFORMATION

In connection with the Global Offering, we commissioned Oliver Wyman to conduct market
research concerning the PRC Insuretech industry as well as technology applications in the PRC
insurance industry. Oliver Wyman is a wholly-owned subsidiary of Marsh & McLennan Companies,
a global management consulting firm with 50 offices in 26 countries. It has deep industry knowledge
with specialized expertise in strategy, operations, risk management, and organization transformation.
We believe that Oliver Wyman has specialized research capabilities and experience for the insurance
and Insuretech markets in China and globally. The information from Oliver Wyman disclosed in the
prospectus is extracted from the Oliver Wyman Report, which was commissioned by us for a fee of
RMB2.2 million and is disclosed with the consent of Oliver Wyman. The payment of such fee was not
conditional on our successful listing or on the results of the Oliver Wyman Report. The Oliver Wyman
Report is independent from our influence.

In preparing the Oliver Wyman Report, Oliver Wyman has conducted primary research, which
involved discussions with industry experts and leading industry participants about the status of the
insurance, Insuretech and other related industries in China. Oliver Wyman has also conducted
secondary research, which involved review of data published by official institutions, public company
reports, independent research reports and data from Oliver Wyman’s own research database. Oliver
Wyman’s projections on market sizes are based on its market forecasting methodology, which takes
into consideration various factors, including (i) historical data, (ii) its assessment of the
macroeconomic and regulatory environment, (iii) key drivers and restraints of the relevant market as
estimated by Oliver Wyman, and (iv) expert opinions on the future development of the insurance and
Insuretech industries. Oliver Wyman’s projections on the insurance and Insuretech market sizes in
China are based on certain assumptions, including: (i) the social, economic and political environments
in China and around the world will remain stable; (ii) key drivers of the insurance and Insuretech
industries will remain relevant and applicable in the forecast period; and (iii) no subversive changes
will happen to the insurance, Insuretech and other related industries.

After making reasonable enquiries, our Directors confirm that there has been no adverse change
in the market information presented in the Oliver Wyman Report since the date of such report which
may qualify, contradict or impact the information in this “Industry Overview” section.

THE TRANSFORMATION OF THE PRC ECONOMY

While China’s GDP growth has slowed down in recent years, the PRC economy is undergoing
a structural transformation under the “New Normal,” whereby economic growth is increasingly driven
by consumer spending and technological innovations.

— 106 —
INDUSTRY OVERVIEW

The rise of the PRC economy in the past several decades was largely accomplished under an
investment-driven and export-oriented model. In recent years, China has attached greater importance
to increasing domestic consumption as a driver to economic growth. Personal consumption has been
growing at a faster rate than overall GDP since 2009 and the trend is expected to continue in the
foreseeable future, according to the Oliver Wyman Report. However, in terms of personal consumption
as a percentage of GDP, China still lags behind many developed countries by wide margins. In 2016,
personal consumption accounted for only 39% of GDP in China, compared with 69%, 63%, 57% and
55% in the United States, the United Kingdom, Japan and Germany, respectively, according to the
Oliver Wyman Report. Therefore, there are significant potentials for the further growth of
consumption in China. As a result of China’s growing disposable income and consumption needs,
consumers have developed stronger demand for financial services. Personal investable assets in China
reached RMB134 trillion in 2016, according to the Oliver Wyman Report, which have increased the
demand for wealth management and other investment services. Meanwhile, greater and more
diversified consumption needs have generated increasing demand for payment, financing and
protection services.

The transformation of the PRC economy is characterized by rapid penetration of internet, mobile
internet and related technological innovations. As of December 31, 2016, China’s internet and mobile
internet populations reached 731 million and 695 million, respectively, representing penetration rates
of 53% and 50%, respectively, according to the Oliver Wyman Report. However, such penetration rates
are still relatively low compared to developed countries, and there is substantial room for further
growth. In particular, internet and mobile financial services have quickly gained popularity in China.
For example, as of December 31, 2016, 57.7% and 44.6% of all mobile users in China used mobile
payment and mobile banking services, respectively, according to the Oliver Wyman Report. Compared
with traditional financial service channels, online platforms provide more convenience in access, more
diversified product choices and price benchmarks. The emergence of various new technologies is
expected to further enhance the convenience, personalization, cost effectiveness and security of online
financial services. Specifically, internet of things, cloud computing, blockchain and big data analytics
are some of the representative technologies that are changing the landscape of the financial services
industry.

With strong government support for innovation and well-established yet rapidly evolving online
ecosystems, both traditional and non-traditional financial industry participants in China are presented
with immense opportunities. We believe that insurance plays an important role in this transformation.

OVERVIEW OF THE PRC INSURANCE MARKET

Market Size and Breakdowns

Insurance provides financial protection from various forms of losses, such as property, life or
health. Insurance can also play an important role in individual and family financial planning. The PRC
insurance market has experienced rapid growth in recent years, increasing from RMB1.4 trillion in
2011 to RMB3.1 trillion in 2016 as measured by GWP, representing a CAGR of 17.2%, according to
the Oliver Wyman Report.

Although the size of the PRC insurance market was the second largest in the world as measured
by GWP in 2016 according to the Oliver Wyman Report, insurance penetration and density in China
are still substantially lower than those in developed countries, indicating significant growth potentials.
According to the Oliver Wyman Report, in 2015, GWP over GDP was only 3.6% in China, compared
with 10.9%, 9.9%, 7.3% and 6.3% in Japan, the United Kingdom, the United States and Germany,
respectively; and GWP per capita was only US$0.3 thousand in China, compared with US$3.6
thousand, US$4.4 thousand, US$4.1 thousand and US$2.6 thousand in Japan, the United Kingdom, the

— 107 —
INDUSTRY OVERVIEW

United States and Germany, respectively. According to the Several Opinions of the State Council on
Accelerating the Development of the Modern Insurance Service Industry 《
( 國務院關於加快發展現代
保險服務業的若干意見》) issued in 2014, China’s GWP to GDP ratio and per capita GWP are targeted
to reach 5% and RMB3,500, respectively, by 2020.

Furthermore, the PRC government deems insurance a strategically important industry and has
provided strong support. See “— Favorable Regulatory Development” below. Partly based on the
favorable policies, the PRC insurance market is projected to further expand to RMB4.9 trillion in
2021, representing a CAGR of 9.6% from 2016 to 2021, according to the Oliver Wyman Report.

The insurance market can be divided into three segments: property and casualty (“P&C”), life,
and accident and health (“A&H”). The following chart shows the historical and projected breakdown
of the PRC insurance market from 2011 to 2021:
(in trillions of RMB)
2011-2016 CAGR: 17.2% 2016-2021F CAGR: 9.6%
4.9
4.5
4.2
3.8 1.0
3.4 0.8 Life
3.1 0.8
0.7 P&C
0.6 1.4 1.5
2.4 0.5 1.2
2.0 1.0 1.1 A&H
1.4 1.5 1.7 0.3 0.9
0.2 0.8
0.1 0.1 0.2 0.7
0.5 0.5 0.6 2.0 2.2 2.3 2.4
1.7 1.9
0.9 0.9 0.9 1.1 1.3

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Source: CIRC, Oliver Wyman Report

Insurance products are distributed through multiple channels. In China, life insurance is
predominantly distributed by agents or in partnership with banks under the “bancassurance” model. By
contrast, approximately 40% of non-life insurance (including P&C and A&H) in China is sold by
insurance companies directly including through the internet. According to the Oliver Wyman Report,
direct sales of non-life insurance products are expected to further accelerate as online insurance
marketplaces improve in product offerings and pricing.

Favorable Regulatory Development

The PRC government has issued several major policy pronouncements guiding the development
of the insurance industry, such as the Several Opinions of the State Council on the Reform and
Development of the Insurance Industry 《 ( 國務院關於保險業改革發展的若干意見》) in 2006 and
CIRC’s Outline of the 13th Five-Year Plan for China’s Insurance Industry 《
( 中國保險業發展“十三五”
規劃綱要》) in 2016. According to the Oliver Wyman Report, the following recent regulatory
developments are expected to have a positive impact on the PRC insurance industry:

• PBOC Fintech Committee. In May 2017, the PBOC established a Fintech committee to strengthen
research on Fintech and to promote the healthy development of China’s Fintech industry.

• C-ROSS. The China Risk Oriented Solvency System (C-ROSS), a new-generation solvency
system developed by the CIRC, took effect in January 2016. C-ROSS reflects the determination
of the CIRC to give the market a decisive role in resource allocation.

• Deregulation on pricing. Pricing deregulation is gradually taking place, covering some


previously tariffed traditional products, such as auto insurance and life insurance.

• Deregulation in asset management. Compared with a few years ago, insurance companies in
China are allowed to invest in a wider range of assets.

— 108 —
INDUSTRY OVERVIEW

• Changes in accounting rules on the inclusion of investment products in GWP. In 2011, changes
in PRC accounting rules resulted in the exclusion of certain investment products from GWP.
Such changes are intended to foster a healthier product structure and better investment risk
management.

THE PRC INSURETECH MARKET

Market Definition and Segments

The Insuretech market is created by the dynamic interplay between insurance and technology.
According to the Oliver Wyman Report, the PRC Insuretech market consists of three segments:

• Online distribution. The first Insuretech segment involves selling traditional insurance products
through online or mobile channels. Online and mobile distribution allows insurance companies
to reach long-tail customers in an efficient and cost-effective manner, and provides customers
with improved experience.

• Technology enabled upgrade. The second Insuretech segment involves utilizing technology to
make existing insurance products more targeted, customized and dynamic. Insurance companies
are using technology to collect and analyze a massive amount of user and transaction data, which
helps insurance companies manage the underlying risks and optimize operations and claims
efficiency.

• Ecosystem-oriented innovation. The third Insuretech segment involves leveraging data analytics
to satisfy previously unmet insurance needs that have arisen in various ecosystems, such as
e-commerce, travel and health.

Ecosystem-oriented innovation represents the most novel expansion of the traditional insurance
industry by covering previously unaddressed risks in an innovative way to reach customers. Not only
does ecosystem-oriented innovation increase the scope of the insurance market, it also helps drive
further growth of the relevant ecosystems by strengthening customer confidence and improving
customer experience. Insurance alleviates customer concerns by providing an additional level of
protection against financial, personal or property losses during and after purchases. For example,
shipping return insurance encourages purchases by easing the worry of purchasing goods that might
turn out to be unwanted. It also allows online shoppers covered by such insurance to order multiple
items to try out at home and simply return the unsatisfactory products at no additional shipping cost.
Furthermore, insurance improves both buyer and seller experience by lowering the frequency of
disputes between them. In turn, increased consumption in the relevant ecosystems leads to more
insurance sales, resulting in a virtuous cycle.

Market Size

According to the Oliver Wyman Report, the PRC Insuretech market as measured by GWP was
RMB363 billion in 2016, and is expected to reach RMB1,413 billion in 2021, representing a CAGR
of 31.2%. The most innovative Insuretech segment, ecosystem-oriented innovation, is expected to
grow particularly fast at a CAGR of 62.0%, compared with 26.1% and 41.1% for online distribution

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INDUSTRY OVERVIEW

and technology enable upgrade segments, respectively. The following chart shows the historical and
projected GWP breakdown of the three segments of the PRC Insuretech market in 2016 and 2021:

GWP (in billions of RMB)

CAGR: 26.1% CAGR: 41.1% CAGR: 62.0%

229 223
4
961 28
57

538 39
8
20
197 50
5
302
3
41 2 1
169 423 5 6 69
132 35
5
2016 2021F 2016 2021F 2016 2021F

E-commerce Travel
Health Credit
Life Non-Life Non-auto P&C(1) Health Auto Others(2)

Online distribution Technology enabled upgrade Ecosystem oriented innovation

Notes
(1) Non-auto P&C includes insurance products such as property, accident and travel
(2) Others include financial services, lifestyle, sports and entertainment, etc.
Source: Oliver Wyman Report

Development of Insuretech Business Models

According to the Oliver Wyman Report, the development of Insuretech business models consists
of three waves, evolving from the initial technology enablement to ecosystem integration, and
eventually to future derivatives of expansion.

Wave 1: Technology enablement

Traditional insurance companies generally offer homogenous products serving clear and tangible
customer needs, with prices decided by analyzing historical data through actuarial models. The
traditional model entails a large salesforce and operational support team to gain market share. To
improve efficiency and product offerings, insurance companies have started to utilize digital
technologies. For example, online and mobile distribution channels and automated claims processing
reduce staff costs, while cloud computing enables high-capacity, scalable data processing in an
efficient, cost-effective and flexible manner. The technology enablement business model mainly
contributes to the online distribution and technology enabled upgrade segments of the PRC Insuretech
market. However, under this initial wave of development, the fundamentals of the traditional
insurance business model have remained largely unchanged.

Wave 2: Ecosystem integration

Under the ecosystem integration business model, Insuretech companies create a universal
analytics and processing engine that links a third-party online ecosystem with the insurance provider.
Such engine gathers consumer data from the ecosystem, applies analytics to create customized,
scenario-based insurance products and processes claims with automation technology. This new
business model is both asset- and human capital-light, and is based on the ability of Insuretech
companies to reach existing online ecosystems, including smaller and more specialized ecosystems,

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INDUSTRY OVERVIEW

through their open platforms, and then to identify consumers’ needs and create tailored products that
address these needs. Major players operating under this model are mainly newcomers with strong
internet backgrounds. The ecosystem integration business model contributes to all three segments of
the Insuretech market, particularly the ecosystem-oriented innovation segment.

Wave 3: Future derivatives of expansion

As insurance products become embedded in an increasing number of online ecosystems,


insurance companies gain access to a vast array of consumer data across different ecosystems, which
create opportunities for them to develop new businesses. For example, an Insuretech company may
become a provider of credit data, or use blockchain technology to provide personal health information.
In the longer term, consumer data can be used to digitally provide a suite of customized financial
products. This model will ultimately take Insuretech players beyond insurance, turning them into
customer-centric digital service providers.

Competitive Landscape

The three segments of Insuretech have distinct competitive landscapes, with technology-centric
startups being more competitive in the innovative segments of technology enabled upgrade and,
particularly, ecosystem-oriented innovation.

• Online distribution segment. The online distribution segment is mainly dominated by traditional
insurers selling P&C and universal life products. For example, in 2015, PICC and Ping An
Insurance were the dominant leaders in online distribution of P&C insurance, according to the
Oliver Wyman Report.

• Technology enabled upgrade segment. The technology enabled upgrade segment is the
battleground for many new innovative products. Traditional insurers like PICC and Ping An
Insurance are adopting telematics to improve auto insurance pricing methodology. Online
insurance players, such as ZhongAn, offer health insurance based on biometric data collected
from wearable devices, DNA testing or other sources. In terms of gross written premiums,
traditional players like PICC and Ping An Insurance are leading the technology enabled upgrade
segment while the market share of online insurance players like ZhongAn in terms of gross
written premiums are relatively small.

• Ecosystem-oriented innovation segment. The ecosystem-oriented innovation segment is mainly


covered by online-only insurance companies and traditional insurance companies with a
significant online presence. As of the Latest Practicable Date, the four licensed online-only
insurance companies in China were ZhongAn, TK.cn, Yi An and An Xin. Due to their technology
background, these companies tend to have stronger ability to develop insights from large
amounts of customer data than traditional insurers and become first movers of innovating new
products in this segment. However, some traditional insurers are also following the footsteps of
online insurance companies to capture ecosystem related opportunities. The ecosystem-oriented
innovation segment is becoming more populated as an increasing number of traditional insurers
have begun to utilize technology to provide similar products such as shipping return insurance
and flight delay or accident insurance. As a result, those online-only insurance companies are
facing more intense competition in this segment. ZhongAn, as the first and largest online-only
insurance company, mainly operate in the nascent ecosystem-oriented innovation segment and
had a market share of 17% in terms of gross written premiums in this sub-segment, making itself
rank top 5 in this sub-segment, in 2016. Comparing with online-only insurance companies,
traditional insurers need to overcome some major barriers of entry. Many traditional insurers
currently are not able to provide innovative solutions given their limited technological expertise.

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INDUSTRY OVERVIEW

They also may not be able to quickly adapt and respond to ecosystem needs. The product design
processes and corporate structure of traditional insurers may not be optimal for the fast-evolving
ecosystem-oriented innovation segment. Furthermore, traditional insurers may face challenges in
dealing with the conflict between their traditional business and innovative business.

As measured by GWP in 2016, ZhongAn had a 0.9% share of the PRC Insuretech market,
according to the Oliver Wyman Report. Among the four online-only insurance companies, ZhongAn
obtained its online insurance license in October 2013, more than two years earlier than any of the other
three companies, according to the Oliver Wyman Report. ZhongAn is also the clear leader among these
four companies in terms of GWP. The following chart compares the four online insurance companies:

Player Taikang Online Property Yi An Property and An Xin Property and


and Casualty Insurance Casualty Insurance Casualty Insurance Co., Ltd.
Co., Ltd. Co., Ltd.
GWP 3,408
(in millions of RMB)

2,283

794 675
222 75.1
9
2014 2015 2016 2015 2016 2016 2016
License
approval • 2013.10 • 2015.11 • 2016.2 • 2015.12
date
Key partners • Alibaba • Taikang Insurance Group • Yinzhijie • Honganonline
• Ctrip • DXY (a Fintech company) (a Fintech company)
• Ping An Insurance

Source: CIRC, company websites, Oliver Wyman Report

Regulatory Development of Insuretech

Insurance going online is a rising trend in China. In 2016, of the 9.5 billion newly written
policies recorded by the CIRC, approximately 65% were sold online.

The CIRC has shown encouragement and support for innovative insurance products and online
distribution. As of the Latest Practicable Date, the CIRC had issued four online-only insurance
licenses to support the “Internet+” strategy promoted by the PRC government. Regulatory barriers for
innovative insurance products have been relaxed. For example, unlike traditional insurance products
such as auto insurance, shipping return and flight delay insurance can be distributed to nationwide
clients, without the need to obtain approval from provincial regulators. Furthermore, the CIRC
promulgated the Interim Measures for the Supervision of Internet Insurance Businesses 《 ( 互聯網保
險業務監管暫行辦法》) in 2015 to promote the healthy development of internet insurance businesses.

MAJOR INSURETECH ECOSYSTEMS

Insuretech is deeply embedded in different online ecosystems. Certain online ecosystems, such
as e-commerce and travel, have salient inherent risks, which many consumers are willing to pay to
hedge against if the appropriate insurance products are available. These inherent risks create
opportunities for Insuretech companies to develop mutually beneficial insurance products through
cooperation with leading players in the relevant ecosystems. Major online ecosystems that are
currently relevant to the PRC Insuretech industry include, among others, lifestyle consumption,
consumer finance, health, auto and travel. The following is an overview of these major ecosystems and
the opportunities they present to Insuretech companies.

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INDUSTRY OVERVIEW

Lifestyle Consumption

Supported by the rapid growth of the penetration of internet and, in particular, mobile internet,
China has a relatively mature and fast growing e-commerce market. Leading players such as Alibaba
and JD.com operate some of the largest e-commerce platforms in the world. The e-commerce and retail
ecosystem in China is characterized by fast innovation and continuous growth. According to the Oliver
Wyman Report, the gross merchandise value of the online retail market in China grew from RMB1.9
trillion in 2013 to RMB5.3 trillion in 2016, and is expected to further grow to RMB12.6 trillion in
2021, representing a CAGR of 18.9% from 2016 to 2021.

Online retail transactions have various inherent risks that may lead to losses to customers,
merchants as well as the platform operators. For example, purchased goods may be damaged, lost or
stolen during shipping. Customers or merchants may be required to pay shipping costs for returning
products. There may also be security issues relating to payment and customer information, which not
only harm customer, but also affect the reputation of merchants and platform operators.

Insurance can protect against many of the risks inherent in the e-commerce and retail ecosystem.
Examples of innovative insurance products related to e-commerce include shipping return insurance,
warranty insurance, merchant performance insurance and account safety insurance. The large volume
of transactions as well as diverse customer and transaction profiles in e-commerce settings require
dynamic pricing and big data processing capability. Compared with traditional insurance companies,
Insuretech companies are well positioned to capture the opportunities in the e-commerce and retail
related insurance market.

According to the Oliver Wyman Report, the e-commerce and retail related insurance market in
China is entirely addressable by Insuretech. According to the Oliver Wyman Report, the size of this
Insuretech market amounted to RMB5.3 billion in 2016, and is expected to grow to RMB56.9 billion
in 2021, representing a CAGR of 60.8%.

According to the Oliver Wyman Report, key competitors in e-commerce and retail related
insurance market in China include ZhongAn, PICC, Cathay and Huatai. Among them, ZhongAn has
partnered with a larger number of e-commerce platforms, with continuous new product launches and
upgrades.

Consumer Finance

In the Oliver Wyman Report and this section, consumer finance is defined as personal loans for
consumption purposes, excluding mortgages and auto loans. Specifically, it includes, among others,
credit card loans, e-commerce credit offerings and online consumption loan products. According to the
Oliver Wyman Report, China’s consumer finance market is expected to increase from RMB5.7 trillion
in 2016 to RMB13.7 trillion in 2021, representing a CAGR of 19.2%. In particular, non-credit card
consumption loans are expected to grow at a CAGR of 34.7% from 2016 to 2021.

Insurance companies participate in the consumer finance market mainly through underwriting
credit insurance and providing credit facilitation services, such as services related to consumer credit
data and lending technology. During loan origination, insurance companies can utilize the
multi-dimensional consumer data they have collected to analyze the ability, willingness and
sustainability of repayment. Based on such analysis, insurance companies can help their platform
partners integrate online lending and risk management technical capabilities into their existing
ecosystems. Credit insurance is also potentially useful in the creation of loan securitization products
based on consumer credit. Insurance companies may provide additional credit enhancement services
to increase the attractiveness of securitization products to investors.

According to the Oliver Wyman Report, the consumer finance related insurance market in China
is entirely addressable by Insuretech. According to the Oliver Wyman Report, the size of this
Insuretech market amounted to RMB6 billion in 2016, and is expected to grow to RMB50 billion in
2021, representing a CAGR of 52.8%.

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INDUSTRY OVERVIEW

Both traditional players and emerging internet players compete in the consumer finance market.
Compared to traditional banks, Insuretech companies have advantages in their ability to manage
consumer credit risk efficiently through automated processes. As consumer finance gradually moves
online, new methods of risk assessment will be required. Technologies such as facial recognition and
micro-expressions analysis have already been applied to online approval processes. Machine learning
techniques are also being applied to improve fraud detection.

The range of insurance products related to consumer finance is still relatively limited. Key
players in this industry include ZhongAn, Ping An Insurance, TK.com and Sunshine Insurance. They
mainly provide consumer credit insurance as a means to facilitate online borrowing and lending.

Health

China’s healthcare market is one of the largest in the world and is expected to continue to grow
at a fast pace. According to the Oliver Wyman Report, healthcare spending in China is expected to
increase from RMB4.4 trillion in 2016 to RMB7.8 trillion in 2021, representing a CAGR of 12.1%.

Insurance plays an integral role in making healthcare accessible to the masses. Driven by strong
government support, rising awareness of using insurance to manage health risk and increasing
affordability, China’s health insurance market is expected to grow faster than overall healthcare
spending. According to the Oliver Wyman Report, health insurance GWP in China is expected to grow
from RMB404 billion in 2016 to RMB874 billion in 2021, representing a CAGR of 16.7%.

Historically, the PRC government itself was the predominant health insurance provider. Under
recent healthcare reforms, however, the government has been working more actively with health
insurance companies.

The health insurance market in China is partly addressable by Insuretech. According to the
Oliver Wyman Report, the size of the health related Insuretech market amounted to RMB30 billion in
2016, and is expected to grow to RMB198 billion in 2021, representing a CAGR of 45.9%. The
percentage of the overall health insurance market that is addressable by Insuretech is expected to
increase from 7% in 2016 to 22% in 2021, according to the Oliver Wyman Report. The following chart
shows the historical and projected GWP breakdown of the three segments of the PRC health related
Insuretech market from 2016 to 2021:

(in billions of RMB)


CAGR: 45.9%
198
8
28 Online distribution
128
5 Technology-enabled
93 19 upgrade
66 3
2 14 161 Ecosystem-oriented
45 1 10
30 105 innovation
1 7 77
5 64
25 37
2016 2017F 2018F 2019F 2020F 2021F

Source: Oliver Wyman Report

Health insurance is increasingly dependent on online distribution channels given their low cost
of customer acquisition and the convenience they bring to consumers. Companies have also been
bringing innovation to the technology enabled upgrades segment of the health related Insuretech
market. Both traditional and online companies, including Taikang, PICC, and ZhongAn, have started
to process claims submitted digitally. ZhongAn has partnered with Xiaomi to integrate data collected
from fitness wearable devices into health insurance pricing. ZhongAn also offers health insurance
products based on the test results of advanced DNA diagnosis.

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INDUSTRY OVERVIEW

Ecosystem-oriented innovation is a new and promising segment for health insurance. In China,
certain specific doctors in prestigious hospitals are not easily accessible to patients. Online insurer Yi
An currently offers an insurance product that allows consumers to gain priority registration to see a
doctor and makes payout if registration is unsuccessful.

Auto

China has become the largest auto market in the world. According to the Oliver Wyman Report,
the number of outstanding vehicles in China amounted to 194 million in 2016, and is expected to grow
to 321 million in 2021, representing a CAGR of 10.6%. China’s auto market still has tremendous
growth potential. Even by 2021, every 1,000 people in China are expected to own less than 250 cars,
compared with over 800 cars for the United States currently, according to the Oliver Wyman Report.

Auto insurance is the largest component of the P&C insurance market in China. With a GWP of
RMB683 billion in 2016, auto insurance accounted for 77% of the overall P&C market, according to
the Oliver Wyman Report. The auto insurance market is expected to grow steadily to RMB1,171
billion in 2021, representing a CAGR of 11.4% from 2016 to 2021.

The auto insurance market in China is dominated by traditional P&C insurers. Concentration is
high with the top five players making up 80% of market GWP, according to the Oliver Wyman Report.
Auto insurance, including its pricing, is still highly regulated in China, but gradual deregulation is
opening up the market to more nimble online insurance players.

The auto insurance market in China is partly addressable by Insuretech. According to the Oliver
Wyman Report, the size of the auto related Insuretech market amounted to RMB124 billion in 2016,
and is expected to grow to RMB412 billion in 2021, representing a CAGR of 27.1%. The percentage
of the overall auto insurance market that is addressable by Insuretech is expected to increase from 18%
in 2016 to 35% in 2021, according to the Oliver Wyman Report. Currently, auto related Insuretech
products mainly fall into the online distribution and technology enabled upgrade segments. Traditional
insurance products sold through ecosystems are not considered to fall into the ecosystem-oriented
innovation segment. The following chart shows the historical and projected GWP breakdown of the
three segments of the PRC auto related Insuretech market from 2016 to 2021:

(in billions of RMB)


CAGR: 27.1%

412 Online distribution

322 Technology-enabled
255 197 upgrade
201 139
157 99
124 70
35 49 216
131 156 184
89 108
2016 2017F 2018F 2019F 2020F 2021F

Source: Oliver Wyman Report

Online distribution helps insurance companies reduce cost and improve customer experience.
Many traditional insurance companies have set up their own websites or utilized third-party platforms
to provide direct quotes and sell policies. An increasing number of traditional insurance companies are
also trying to pilot automated claims processing.

Technology enabled upgrade is an area where Insuretech companies are able to add value for
customers. With the help of products like telematics devices that capture drivers behavioral data,
Insuretech companies can use advanced algorithms and big data techniques to tailor product pricing

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INDUSTRY OVERVIEW

to observed risk levels. For example, ZhongAn and a PRC automaker has jointly set up a research
center to develop internet of things and telematics solutions. Ping An and ZhongAn are partnering with
telematics hardware companies to test the technology for usage-based insurance. An Xin is also
partnering with insurance agents to develop similar products.

Travel

According to the Oliver Wyman Report, the PRC travel market amounted to RMB2.2 trillion in
2016, and is expected to grow to RMB3.9 trillion in 2021, representing a CAGR of 12.1%. Online
travel agencies (“OTAs”) play an important role in China’s travel market. Major OTAs in China
include Ctrip, Tuniu, LY.com, Lvmama and Aoyou. OTAs tend to offer similar products, and they
mainly differentiate themselves through additional value-added services. The availability of
travel-related insurance products is one of such value-added services that help attract customers.

Travel is often associated with stress and uncertainty. For example, customers are generally
required to pay high fees for cancellation or changes. They may encounter unpleasant events such as
flight delays and loss of personal belongings. There may also be security issues relating to payment
and customer information.

The travel ecosystem provides many opportunities for Insuretech companies to innovate. In
China, an increasing percentage of travel is booked through online or mobile channels. Insurance
products that are well integrated into OTA websites or apps and can be purchased without strict time
constraints are especially welcomed by consumers. Some of the travel related risks outlined above are
already addressed by innovative products designed by Insuretech companies. For example, flight delay
insurance can compensate travelers in case of flight delay, and weather insurance can cover some
losses if customers have to cancel a trip or skip certain activities during the trip.

According to the Oliver Wyman Report, the travel related insurance market in China is entirely
addressable by Insuretech. According to the Oliver Wyman Report, the size of this Insuretech market
amounted to RMB6.0 billion in 2016, and is expected to grow to RMB47.3 billion in 2021,
representing a CAGR of 51.1%. Among the three Insuretech segments, ecosystem-oriented innovation
is expected to experience the strongest growth in the next few years, according to the Oliver Wyman
Report. The following chart shows the historical and projected GWP breakdown of the three segments
of the PRC travel related Insuretech market from 2016 to 2021:

(in billions of RMB)


CAGR: 51.1%
47.3
41.2
8.4 Online distribution
6.6 0.3
21.5 0.2 Technology-enabled
13.8 upgrade
9.0 5.2
6.0 34.4 38.6 Ecosystem-oriented
3.2 4.1 0.1
2.5 innovation
0.1 0.1 0.1 16.1
5.7 9.6
3.4
2016 2017F 2018F 2019F 2020F 2021F

Source: Oliver Wyman Report

In China, both traditional insurance companies and online insurance companies are actively
competing in the travel related insurance market. According to the Oliver Wyman Report, key
competitors in this market include ZhongAn, Huatai, CPIC, PICC and Ping An Insurance.

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REGULATORY OVERVIEW

PRC REGULATORY OVERVIEW

The insurance industry in the PRC is regulated by the CIRC and its local bureaus. The legal
provisions constituting the legal framework for supervising and regulating insurance activities in the
PRC mainly include the PRC Insurance Law and the administrative rules, regulations and other
regulatory documents promulgated pursuant to the PRC Insurance Law.

REGULATORY AUTHORITY — CIRC

The CIRC was set up on November 18, 1998. According to the Notice relating to the
Establishment of the China Insurance Regulatory Commission of the State Council
(國務院關於成立中國保險監督管理委員會的通知) implemented on November 14, 1998, the CIRC is
the competent authority regulating commercial insurance in China and a regulatory body directly
under the State Council. The CIRC performs administrative management functions as authorised by
the State Council and centrally supervises and regulates the insurance market in a uniform way in
accordance with laws and regulations. The major tasks of the CIRC include formulating policies and
regulations as well as developing industry plans in relation to commercial insurance, conducting
supervisory administration and providing business guidelines on the operational activities of insurance
enterprises in compliance with law, maintaining the order of the insurance market, administering
investigations and punishment of insurance enterprises that violate the law, protecting the interests of
the insured, cultivating and developing the insurance market, promoting reform of the insurance
industry, improving the insurance market system, facilitating fair competition among insurance
enterprises, establishing the assessment and warning systems for risks in the insurance market,
preventing and mitigating risks in the insurance market, facilitating stable and sound operation of
insurance enterprises and healthy development of businesses.

According to the Notice relating to the Principal Responsibilities, Internal Organisation and
Personnel Establishment of the China Insurance Regulatory Commission (國務院辦公廳關於印發中國
保險監督管理委員會主要職責內設機構和人員編製規定的通知) issued by the General Office of the
State Council on 7 July 2003, and the Catalogue for Administrative Approvals of the CIRC
(中國保監會行政審批事項目錄) and information published on the CIRC website, the principal
authorities of the CIRC include:

• preparing principles and policies for the development of the insurance industry;
formulating industry development strategies and plans; drafting laws and regulations for
the supervision and regulation of the insurance industry and formulating industry rules and
regulations of the insurance industry;

• approving the establishment of insurance companies and their branches, insurance group
companies and insurance holding companies; jointly with the relevant authorities approving
the establishment of insurance asset management companies; approving the establishment
of representative offices by overseas insurance institutions; approving the establishment of
insurance intermediaries such as insurance agencies, insurance brokerage companies,
insurance loss adjusting companies and their respective branches; approving the
establishment of overseas insurance institutions by domestic insurance and non-insurance

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REGULATORY OVERVIEW

institutions; approving mergers, splits, changes of corporate forms and dissolutions of


insurance institutions and making decisions on the receivership and the appointment of
receivers; participating in and overseeing the bankruptcy and liquidation proceedings of
insurance companies;

• examining and confirming the qualifications of senior management members in various


types of insurance institutions; setting the basic qualification standards for insurance
practitioners;

• approving the terms and premium rates of insurance products related to public interests,
statutory mandatory insurance and newly developed life and health insurance products;
supervision of other insurance products through registration of the insurance terms and
premium rates of such insurance;

• supervising the solvency and market activities of insurance companies; managing the
insurance guarantee funds and monitoring the insurance security deposits; formulating the
relevant rules and regulations on the basis of laws and policies of the PRC Government on
the deployment of insurance fund, and supervising the deployment of funds by insurance
companies;

• conducting business supervision on fiscal subsidy insurance and mandatory insurance;


supervising organizational forms and operations such as captive insurance and mutual
insurance; centralizing the administration of insurance industry associations and
organizations such as the Insurance Association of China and The Insurance Institute of
China;

• investigating into and imposing penalties on illegal acts and misconducts of insurance
institutions and practitioners such as unfair competition according to the law and direct or
disguised engagement in insurance business by non-insurance institutions;

• supervising overseas insurance institutions established by domestic insurance and


non-insurance institutions; and

• establishing the standards for information systems of the insurance industry; establishing
insurance risk-assessment, risk-warning and risk-monitoring systems; tracking, analyzing,
monitoring and forecasting the operating conditions of the insurance market; centralizing
compilation of statistical data and reports for the national insurance industry and carrying
out publication in accordance with relevant regulations.

Regulatory and Legal Framework

The PRC Insurance Law is the most important law in the regulatory and legal framework for the
PRC insurance industry. The PRC Insurance Law was passed on June 30, 1995, implemented on
October 1, 1995 and amended four times in 2002, 2009, 2014 and 2015, respectively.

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REGULATORY OVERVIEW

The PRC Insurance Law implemented on October 1, 1995 covers general principles, insurance
contracts, insurance companies, insurance operational rules, supervision and regulation of the
insurance industry, insurance agencies and insurance brokerage companies, legal liabilities and
supplementary provisions. It was the fundamental insurance law of the PRC.

In 2015, the PRC Insurance Law was amended for the fourth time. Such amendments primarily
include: (i) the deletion of the clauses related to the requirement that the establishment of an offshore
representative office by an insurance company shall be subject to the approval of the insurance
regulatory authorities under the State Council; (ii) abolishment of the requirement that the individuals
who are engaged in insurance sales for an insurance company shall obtain the qualification certificates
issued by the insurance regulatory authorities, and replace such requirement with the requirement that
the aforesaid individuals should be of good character and have the professional competence required
for insurance sales, and the deletion of all provisions in the PRC Insurance Law related to the
requirements that the aforesaid individuals shall obtain the qualification certificates stipulated in the
PRC Insurance Law; (iii) the deletion of the provisions that individual insurance agents, agency
practitioners of insurance agencies and brokerage practitioners of insurance brokers shall obtain the
qualification certificates issued by the insurance regulatory authorities in the PRC insurance law and
stipulated the new provision that the aforesaid individuals should be of good character and have
professional competence required in transacting insurance agencies and insurance brokerage
businesses; (iv) the abolishment of the requirements that the merger and divisions of corporates and
any change of the corporate structure, establishment of branch offices and dissolution of insurance
agencies and insurance brokerages shall be subject to the approval of the insurance regulatory
authority.

Since the promulgation of the PRC Insurance Law in 1995, the insurance supervision and
regulatory authority has promulgated a series of departmental rules and regulations and other
regulatory documents pursuant to the PRC Insurance Law, which covered almost all aspects of
insurance operations.

Establishment and Business Operation Qualification

Legal Framework

The PRC insurance laws and regulations set out different requirements on establishment and
business operation qualification for different types of entities engaged in insurance business,
including insurance companies, insurance intermediaries and insurance asset management companies.

For the establishment of insurance companies, in addition to the PRC Insurance Law, important
laws and regulations also include the Administrative Regulations for Insurance Companies
(保險公司管理規定) implemented on October 1, 2009 and amended in October 2015. The
Administrative Regulations for Insurance Companies set out regulations on the organisation
structuring of insurance companies, branch establishment, change in organization structure,
dissolution and deregistration of organisation, branch management, insurance operation and
supervision and management.

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REGULATORY OVERVIEW

Qualification of Shareholders of Insurance Companies

According to the PRC Insurance Law, the Administrative Regulations for Insurance Companies
(保險公司管理規定), the Measures for Administration of Controlling Shareholders of Insurance
Companies (保險公司控股股東管理辦法) implemented on October 1, 2012 and the Administrative
Measures on Equity of Insurance Companies (保險公司股權管理辦法) amended in 2014, unless
otherwise provided in laws and regulations, those acquiring equity interests in insurance companies
must be domestic corporate entities in the PRC or overseas financial institutions that satisfy prescribed
conditions, except for those purchasing the shares of listed insurance companies through stock
exchanges.

A domestic enterprise must satisfy the following requirements for its equity investment in an
insurance company:

• having a stable and sound financial condition and having been profitable;

• having a good credit and tax payment record;

• having no record of material non-compliance with laws or regulations for the past three
years;

• for financial institutions, having complied with prudent regulatory indicators as required by
relevant financial regulatory authorities; and

• having met other requirements pursuant to applicable laws and administrative regulations
as well as other requirements of the CIRC.

An overseas financial institution must satisfy the following requirements for its investment in an
insurance company:

• having a stable and sound financial condition and having been profitable for the past three
consecutive accounting years;

• having total assets of no less than US$2 billion at the end of the preceding year;

• its long-term credit rating having been given grade A or above by international rating
agencies for the past three consecutive years;

• having no record of material non-compliance with laws or regulations for the past three
years;

• having complied with prudent regulatory indicators as required by the financial regulatory
authorities in its home jurisdiction; and

• having satisfied other requirements pursuant to applicable laws and administrative


regulations as well as other requirements of the CIRC.

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A principal shareholder who holds 15% or more of the equity interest of an insurance company,
or less than 15% of the equity interest of an insurance company but controls the insurance company
directly or indirectly, must also satisfy the following requirements:

• having the ability to make sustained capital contribution and having been profitable for the
past three consecutive accounting years;

• having relatively abundant capital, and its net assets is not less than RMB200 million; and

• having a good reputation and a leading position in its industry.

According to the Notice of the CIRC on Issues Concerning Article 4 of the Administrative
Measures for Equities of Insurance Companies (中國保監會關於<保險公司股權管理辦法>第四條有
關問題的通知) [2013] 29號 , the proportion of capital contribution or shareholdings by a single
shareholder (including related parties) of an insurance company may exceed 20% but not more than
51%. For a shareholder of an insurance company whose proportion of capital contribution or
shareholdings are more than 20% (excluding 20%), apart from satisfying the requirements of Article
15 of the Administrative Measures for Equities of Insurance Companies (保險公司股權管理辦法)
regarding principal shareholders, such shareholder shall also meet the following conditions:

• Total assets at the end of the latest year shall not be less than RMB10 billion;

• Net assets shall not be less than 30% of total assets;

• Foreign long-term equity investment, including the investments in the insurance company,
shall not exceed the net assets;

• Three years (including three years) has lapsed since investing in the insurance company;

• Such shareholder has no behavior which violates the Insurance Law, the Provisions on
Administration of Insurance Companies (保險公司管理規定), the Measures for
Administration of Equity of Insurance Companies (保險公司股權管理辦法), the Measures
for Administration of Controlling Shareholders of Insurance Companies
(保險公司控股股東管理辦法) and other provisions relating to the code of conducts for
shareholders of insurance companies.

The change of any shareholder whose capital investment accounts for 5% or more of a limited
liability company’s registered capital, or the change of any shareholder holding 5% or more of a joint
stock company’s shares, shall be subject to CIRC’s approval. If an investor holds 5% or more of the
issued shares of a listed insurance company through a stock exchange, the insurance company must
report it to the CIRC for approval within five days after the occurrence of such matter. The CIRC has
the authority to require the transfer of all shares held by any shareholder who fails to meet the required
qualification criteria set out in the Administrative Measures on Equity of Insurance Companies

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(保險公司股權管理辦法). Save for listed insurance companies, the change of any shareholder whose
capital contribution or equity interest accounts for less than 5% of an insurance company’s registered
capital shall be submitted to the CIRC for filing within 15 days after the execution of the equity
transfer agreement.

In addition to the above requirements, the Pilot Administrative Measures on Investment by


Commercial Banks in Insurance Companies (商業銀行投資保險公司股權試點管理辦法) implemented
on 5 November 2009 and the Notice of the CIRC on Regulating Equity Investment by Limited
Partnership in Insurance Companies (中國保監會關於規範有限合伙式股權投資企業投資入股保險公
司有關問題的通知) implemented on April 17, 2013 also set forth requirements on the qualification for
companies of special types as shareholders of an insurance company. The Measures for the
Administration of Information Disclosure by Insurance Companies (保險公司信息披露管理辦法)
implemented on June 12, 2010 require insurance companies to disclose shareholders with more than
5% shareholdings and their status of shareholdings, as well as change in controlling shareholders or
de facto controllers and change in registered share capitals; the Notice of the CIRC on Further
Strengthening Disclosure of Information Regarding Equities of Insurance Companies (中國保監會關
於進一步加強保險公司股權信息披露有關事項的通知) [Baojian Fa [2016] No. 62] implemented on
July 15, 2016 has further regulated the information disclosure behaviors of insurance companies
relating to preparation for establishment and change in equity.

Registered Capital

Under the PRC Insurance Law, the minimum registered capital for the establishment of an
insurance company is RMB200 million and all of which must be paid-in monetary capital.

Under the Administrative Regulations for Insurance Companies (保險公司管理規定), insurance


companies that are established with the minimum RMB200 million registered capital must increase
their registered capital by RMB20 million for each branch office they apply for initial establishment
in each province, autonomous region or directly-administered municipality of the PRC outside their
domicile. An insurance company may apply for establishment of a branch office without increasing its
registered capital as required if its registered capital already exceeds the minimal capital amount
required for setting up branches. Insurance companies with a registered capital of RMB500 million or
more may set up branches without increasing their registered capital as long as they have adequate
solvency.

Establishment of Insurance Institutions and Qualifying for Conducting Insurance Business

Under the PRC Insurance Law and Administrative Regulations for Insurance Companies
(保險公司管理規定), the establishment of an insurance company shall be subject to the approval by
the insurance regulatory authority under the State Council. The establishment of an insurance
institution is divided into two stages, namely the preparation for establishment and the commencement
of business.

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An applicant who satisfies the conditions on the establishment of an insurance company shall
submit an application for the preparation for establishment to the insurance supervision and regulatory
authority under the State Council, which may make the decision on the approval of the preparation for
establishment after confirming that the conditions have been indeed satisfied. Within one year after
receipt of the notice on approval for the preparation for establishment, the applicant shall complete
the preparation works and submit an application for the commencement of business to the insurance
supervision and regulatory authority under the State Council, which will issue an insurance business
permit to the applicant if it makes a decision on the approval of the commencement of business after
review. The insurance company may engage in business operation after obtaining the approval on
commencement of business and the insurance business permit and completing registration formalities
with other registration authorities.

Under the PRC Insurance Law, the establishment of a branch office within the PRC by an
insurance company shall be subject to the approval by the insurance supervision and regulatory
authority under the State Council. For those that have satisfied the relevant requirements, the
insurance supervision and regulatory authority under the State Council will carry out inspection in
respect of the commencement of business for a branch office, and issue an insurance business permit
to the branch office if it decides for approval. The branch office of the insurance company whose
establishment has been approved shall commence business after completing registration formalities
with the industrial and commercial administrative departments and obtaining the business license with
the approval documents and the branch office’s insurance business permit.

Insurance Business

Business Scope

According to the provisions of the PRC Insurance Law, the business scope of an insurance
company includes:

• life and health insurance, including life, health, accident and other insurance businesses;

• property and casualty insurance, including property, liability, credit, surety and other
insurance businesses;

• other insurance-related businesses approved by insurance regulatory authority of the State


Council.

Insurers shall not concurrently operate life and health insurance business and P&C insurance
business. However, insurance companies which operate property insurance business can operate
short-term health insurance and accident insurance with approval of insurance regulatory authority of
the State Council.

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After obtaining approval from insurance regulatory authorities of the State Council, insurance
companies can engage in the following reinsurance business of insurance business provided by Article
95 of the PRC Insurance Law:

• Outward reinsurance;

• Inward reinsurance.

According to the Insurance Exchange Management Guidelines (保險業務外匯管理指引)


implemented on March 1, 2015, if insurance companies or their branches carry out insurance business
in the PRC that is denominated in foreign currencies or denominated in RMB but settled with foreign
currencies, such insurance companies shall be subject to approval of local authority of foreign
exchange and also need to obtain approval documents to operate foreign exchange insurance.

Insurance Clauses and Premium Rates

Pursuant to the Administrative Measures on Insurance Clauses and Insurance Premium Rates of
Property and Casualty Insurance Companies (財產保險公司保險條款和保險費率管理辦法) as
amended and implemented on April 1, 2010 and the Notice on Issues Relating to the Implementation
of the Administrative Measures on Insurance Clauses and Premium Rates of Property and Casualty
Insurance Companies (關於實施〈財產保險公司保險條款和保險費率管理辦法〉有關問題的通知)
implemented on May 1, 2010, insurance companies must submit the following property insurance
clauses and premium rates to the CIRC for examination and approval:

• motor insurance;

• non-life insurance with investment features;

• surety and credit insurance with an insurance period exceeding one year;

• other types of insurance concerning social and public interest as identified by the CIRC and
insurance of a compulsory nature pursuant to laws, administrative regulations and
regulatory documents.

Revisions to approved insurance clauses or premium rates by insurance companies shall be


submitted for approval.

Insurance clauses or premium rates of those insurance other than the above set by insurance
companies shall be registered with the CIRC within ten working days after operation. Any
modification or adjustment to insurance liability or premium rates under insurance clauses already
registered should be resubmitted to the CIRC for registration.

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The Notice of the CIRC on Publication of the Guidelines for the Development of Insurance
Products of Property Insurance Companies (中國保監會關於印發<財產保險公司保險產品開發指引>
的通知) promulgated by CIRC on December 30, 2016 and became effective from January 1, 2017 has
provided the basic criteria for the development of insurance products, the naming rules of insurance
products, the insurance clauses requirements, the insurance premium rates requirements, the
requirements of organizations in charge of insurance product development, and the development
procedures of insurance products. In particular, insurance products developed by an insurance
company shall not go against insurance theories, social orders and customs, public interests and the
legitimate rights and interests of insurance consumers. In development of an insurance product, an
insurance company shall thoroughly consider factors such as its underwriting capacity, composition
of its insurance units, its reinsurance backup, etc. The solvency and financial stability of the insurance
company shall not be endangered. An insurance company may not develop insurance products:

(1) which do not have a legally recognized interests in the subject matter insured.

(2) pursuant to which an agreed insured incident will not cause actual loss to the insured.

(3) that the risks insured are determined, for example, no loss will not actually be incurred or
risk of loss is determined.

(4) which are speculative products that may incur either loss or profit.

(5) which has no real content or meaning, but rather a gimmicky product with concept of
speculation.

(6) which has no protection contents but simply for the purpose of reducing price (fees) or
increasing price (fees).

(7) which featured “zero premium”, “premium returned without insurance” or return of other
improper interests.

(8) other insurance product that violates laws and regulations, insurance theories as well as
social orders and good customs.

According to the Guidelines on the Pricing of Products of Property Insurance Companies


(財產保險公司產品費率釐定指引) issued by the CIRC on January 5, 2017 and implemented on
February 1, 2017, insurance companies should set up an internal control cycle mechanism for
preliminary preparation, during-the-course measurement, and post monitoring and adjustment.
Premiums of products include risk premiums and additional premiums. Premium rate consists of a base
rate and a rate adjustment factor. The base rate to be determined includes a pure rate of loss and an
additional rate. Insurance companies shall follow the principle of reasonableness when determining
the rate and are not allowed to secure excess profits that are not commensurate with the risks that they
have undertaken. No high cost levels that are inconsistent with the services provided shall be set in
the rate structure, thereby impairing the legitimate interests of the policyholder and the insured. The
rate set shall match the insurance terms and help the policyholder take the initiative to carry out risk
control. Insurance companies shall follow the principle of fairness when determining the rates, and the

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rates shall match the risk characteristics of the insured and the subject-matter insured and no
discriminatory rate arrangement based on factors other than the risk profiles shall be made; in
determining the rate insurance companies shall follow the principle of adequacy and the rate level
shall not endanger the financial stability and solvency of the insurance companies or impede fair
competition in the market. The rate level after taking into the investment income shall not in principle
be less than the sum of the corresponding costs and the rate adjustment factors set in the rate structure
shall not affect the rate adequacy.

Pursuant to the Interim Measures for the Supervision of Credit Guarantee and Insurance
Business’ promulgated by the China Insurance Regulatory Commission on July 11, 2017, insurance
companies carrying out credit insurance businesses shall comply with the regulatory requirements on
solvency and ensure the overall size of business is appropriate for the capital strength of the company.
When carrying out credit insurance business, insurance companies shall pay particular attention to the
underlying risks, fully assess the impact of credit insurance business on the solvency of the company,
and duly perform liquidity risk management. Insurance companies carrying out credit insurance
business shall submit an annual report on business operation for the previous year before April every
year; the various branches of insurance companies shall report business operation of credit insurance
business in accordance with the provision of local Insurance Regulatory Commission.

According to relevant provisions of the Regulation on Compulsory Traffic Accident Liability


Insurance for Motor Vehicles (機動車交通事故責任強制保險條例) as amended on December 17, 2012,
insurance companies may, upon the approval of the CIRC, conduct statutory automobile liability
insurance business. The CIRC is entitled to require an insurance company to conduct such business.
A policyholder may not add any additional terms and conditions to the insurance clauses and premium
rates specified in such policy. The insurance company may not force the policyholder to enter into a
commercial insurance contract or add additional terms and conditions. Insurance companies may not
rescind statutory automobile liability insurance contracts unless the policyholder fails to perform his
or her obligation of faithful disclosure on important matters. Upon rescinding the contract, an
insurance company must withdraw the insurance product and the insurance marker and notify the
motor vehicle administration department in writing.

Pursuant to the Circular on Strengthening the Control over the Insurance Clauses and Premium
Rates of Commercial Motor Insurance (關於加強機動車輛商業保險條款費率管理的通知)
promulgated by the CIRC on February 23, 2012, insurance clauses and premium rates for commercial
motor insurance formulated by insurance companies shall be submitted to the CIRC for approval and,
if approved by the CIRC, must be strictly implemented by the relevant insurance companies. The terms
of commercial motor insurance shall be complete in content, clear in format and easy to read. Where
an insurance incident is caused by damage to an insured motor vehicle by a third party, from the day
when the insurance company compensates the policyholder for the insured amount, the insurance
company may within the range of the compensation amount exercise the rights of subrogation for the
policyholder to request compensation from the third party. The insurance company may not refuse to
perform its insurance obligation by abandoning the rights of subrogation. The Insurance Association
of China published the Model Terms of Commercial Insurance (機動車輛商業保險示範條款) on
March 14, 2012.

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According to the Measures for the Administration of Insurance Clauses and Premium Rates of
Life and Health Insurance Companies (人身保險公司保險條款和保險費率管理辦法) implemented on
December 30, 2011 and as amended on October 19, 2015, insurance companies are required to submit
to the CIRC for approval the insurance clauses and premium rates of the following insurance products
before they are adopted:

• insurance products associated with public interests;

• insurance products of a compulsory nature in accordance with laws;

• newly developed life insurance products as stipulated by the CIRC;

• other insurance products as required by the CIRC.

Other types of insurance other than the above must be submitted to the CIRC for record.

If insurance companies change personal insurance clauses and premium rates already approved
or filed, or change their insurance liability, insurance categories or pricing methods, insurance clauses
and premium rates should be resubmitted for approval or filing. If insurance companies decide to
terminate the use of personal insurance clauses and premium rates throughout the country, they shall
submit a report to the CIRC within ten days after the termination, explaining the reason for the
termination, follow-up services and other related measures, and submit the report copy to the regional
bureau of the CIRC of original operating locations.

According to the Measures for the Administration of Insurance Clauses and Premium Rates of
Life and Health Insurance Companies (人身保險公司保險條款和保險費率管理辦法), chief actuaries
of insurance companies shall produce chief actuary statements in respect of insurance clauses and
premium rates submitted for approval or filing, and shall sign on the relevant actuarial report and the
premium rate adjustment measures or product parameter adjustment measures.

According to the Measures for the Administration of Insurance Clauses and Premium Rates of
Life and Health Insurance Companies (人身保險公司保險條款和保險費率管理辦法), an insurance
company that submits insurance clauses and premium rates for approval or filing shall appoint a
legally responsible person and be approved by the CIRC. The legally responsible person of an
insurance company shall issue a declaration of legally responsible persons for insurance clauses
submitted for approval or filing, and shall bear the liability that the insurance clauses are fair and
reasonable with precise and prudently expressed text, and are consistent with the Insurance Law and
other laws, administrative regulations and the relevant requirements of the CIRC. An insurance
company shall not appoint any legally responsible person in any form without the approval of
qualification by the CIRC.

According to the Notice of the CIRC on Issues concerning the Regulation of Personal Insurance
Products with Short and Medium Duration (中國保監會關於規範中短存續期人身保險產品有關事項
的通知) that became effective on March 21, 2016, an insurance company shall reasonably determine

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the scale of premiums of products with short and medium duration according to the company’s capital
strength and other factors. An insurance company’s annual premium income from products with short
and medium duration shall be controlled within the quota as required in Article 6 of the notice.

According to the Notice of the CIRC on Issues concerning Further Improving the Actuarial
System of Personal Insurance (中國保監會關於進一步完善人身保險精算制度有關事項的通知)
promulgated and implemented on September 2, 2016, an insurance company shall submit newly
developed life insurance products with proposed interest rate or minimum guaranteed interest rate not
higher than maximum assessed rate to the CIRC for record.

According to the Notice of the CIRC on Strengthening the Supervision of Personal Insurance
Products (中國保監會關於強化人身保險產品監管工作的通知) promulgated and implemented on
September 2, 2016, an exit mechanism for personal insurance products will be established. Where the
CIRC discovers through spot check and determines that an insurance company’s product on record is
involved in any violation of law or regulation, it will order the insurance company to cease the use
of the product involved in the violation and release to the public information on the suspension of the
sales of the product.

Internet Insurance Business

According to the Notice of the CIRC on Issuing the Interim Measures for the Supervision of the
Internet Insurance Business (互聯網保險業務監管暫行辦法) promulgated on July 22, 2015 and
implemented on October 1, 2015, insurance institutions which carry out internet insurance business,
that is, conclusion of insurance contracts and provision of insurance services via self-operated
network platforms, and third-party network platforms, among others, by relying on the internet,
mobile communications, and other technologies, shall comply with the relevant provisions and shall
not damage the lawful rights and interests of insurance consumers and public interest. Insurance
institutions shall scientifically evaluate their risk management and control capability and customer
service capability, and rationally determine insurance products appropriate for internet operations and
the marketing scope thereof. If they cannot guarantee customer service quality or risk management and
control, they shall make adjustments in a timely manner. Insurance institutions shall ensure that
internet insurance consumers enjoy insurance services such as insurance purchase and claim
settlement that are not less than those from any other business channel, and guarantee the safety of
insurance transaction information and consumer information. Insurance institutions shall manage and
take charge of insurance operations of the internet insurance business, including sales, underwriting,
claim settlement, surrender, handling of complaints, and customer services. Third-party network
platforms that engage in the aforesaid insurance business shall have obtained the qualification to
engage in the insurance business.

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A self-operated network platform which an insurance institution conducts the internet insurance
business through shall meet the following conditions:

• It has an information management system supporting internet insurance business


operations, realizes real-time seamless connection with the core business systems of the
insurance institution, and ensures effective separation from any other internal application
system of the insurance institution, so as to avoid the transmission and spread of
information safety risks inside and outside the insurance institution;

• It has a complete internet information safety management system covering firewall,


invasion detection, data encryption, and disaster recovery, among others;

• It has a license issued by the competent authority of the internet industry or has completed
filing of its website with the competent authority of the internet industry, and the
connection into the website is within the territory of the People’s Republic of China;

• It has a special department that manages the internet insurance business, and has the
corresponding professionals;

• It has complete management rules and operating procedures for the internet insurance
business;

• Internet insurance business salespersons shall comply with the relevant provisions of the
CIRC;

• Other conditions as required by the CIRC.

Where an insurance institution conducts internet insurance business through a third-party


network platform, the third-party network platform shall meet the following conditions:

• It has the license issued by the competent internet industry authority or has completed filing
of its website at the competent internet industry authority, and the connection into the
website is within the territory of the People’s Republic of China;

• It has a safe and reliable internet operation system and information safety management
system, and realizes effective separation from any application system of the insurance
institution, so as to avoid the transmission and spread of information safety risks inside and
outside the insurance institution;

• It is able to provide the personal identity information, contact information, account


information, operation track of insurance purchased, and other information on the insurance
applicant, the insured and the beneficiary required for conducting the insurance business to
the insurance institution in a complete, accurate and timely manner;

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• It has not been given any serious administrative punishment by the competent internet
industry authority, the administrative authority for industry and commerce or any other
government authorities in the past two years, and has not been included by the CIRC in the
list of entities subject to cooperation prohibition in the insurance sector;

• Other conditions as required by the CIRC.

Where the third-party network platform fails to meet the aforesaid conditions, the insurance
institution shall not cooperate with it in conducting internet insurance business.

In order to implement the decision and arrangement of the CPC Central Committee and the State
Council and to promote the healthy development of internet insurance standards, the CIRC together
with 14 authorities issued the Implementation Plan for the Special Campaign on Internet Insurance
Risks (互聯網保險風險專項整治工作實施方案) ( hereinafter referred to as the “Plan”).

According to the Plan, comprehensive arrangements are made for the Special Campaign on
Internet Insurance Risks, which circles around the objectives of regulating the operation patterns;
optimizing the market development environment; improving the regulation systems and rules;
realizing equal emphasis on innovation and risk prevention; promoting the sound and sustainable
development of internet insurance; adhering to the principles of highlighting key points and being
vigorous and steady, implementing measures by different category, tackling both problems and causes,
specifying responsibility, and strengthening cooperation. Emphasis of remediation includes the
following three aspects: The first aspect is the internet business of high cash value, with focus on
investigating and correcting insurance companies which make misrepresentation of one-sided or
exaggerating past performance in the sales of insurance products through the internet, and make
misleading description such as illegal profit commitment or committing to bear loss. The second
aspect is the cross-border business expansion of insurance institutions through the internet, with focus
on investigating and correcting acts of insurance companies which cooperate with network platforms
of third-party operators unqualified for operating internet insurance business; insurance companies
which cooperate with internet financing platforms which have the acts of providing credit
enhancement services, establishing fund pools and illegal financing, triggering the migration of risks
to the field of insurance; insurance companies in the course of operating internet credit platforms
financing guaranteed insurance business with circumstances such as imperfect means of risk control
and internal control management. The third aspect is the illegal operation of internet insurance
business, with focus on investigating and correcting issues such as illegal operation of internet
insurance business by non-licensed institutions and operation of insurance business through the
internet by internet companies without obtaining business qualification; and illegal fund-raising by
illegal institutions and illegal personnel through the internet using the name of or borrowing the credit
of insurance companies. Internet insurance practitioners should strictly implement the requirements of
third party custodian system for customer funds to protect the security of customer funds. Through
reporting and heavy penalties, problems shall be detected in a timely manner and institutions
conducting misconducts and illegal acts shall be investigated and corrected.

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Governance of Insurance Companies

Pursuant to the PRC Company Law and the Guiding Opinions on Regulating the Corporate
Governance Structure of Insurance Companies (Pilot) (關於規範保險公司治理結構的指導意見(試行))
as implemented on January 5, 2006, insurance companies are required to hold shareholders’ meetings
(general shareholders’ meetings) and establish the board of directors, the board of supervisors and the
management, and to allocate and classify the powers of the same in the articles of association and
relevant internal governance documents. The board of directors of insurance companies must have at
least two independent directors and the proportion of independent directors must gradually account for
more than one third of the members of the board of directors, and at least an audit committee and a
nomination and remuneration committee must be established under the board of directors.

Pursuant to the Guiding Opinions on Regulating the Corporate Governance Structure of


Insurance Companies (關於規範保險公司治理結構的指導意見), insurance companies are required to
establish an audit department, a risk management department and a compliance department to enhance
internal control, risk management and compliance.

Under the Guiding Opinions on Regulating the Corporate Governance Structure of Insurance
Companies (關於規範保險公司治理結構的指導意見), insurance companies are required to set up an
internal management system in respect of related transactions and file with the CIRC.

According to the Guiding Opinions on Regulating the Corporate Governance Structure of


Insurance Companies (關於規範保險公司治理結構的指導意見), material resolutions at shareholders’
general meetings and board of directors’ meetings of insurance companies must be reported to the
CIRC within 30 days after passing the resolution. The board of directors of an insurance company is
required to submit compliance report to the CIRC each year.

Pursuant to the Notice of the CIRC on Further Regulating Submission of Governance Report by
Insurance Companies (中國保監會關於進一步規範報送〈保險公司治理報告〉的通知) promulgated
and implemented on June 1, 2015, insurance companies and insurance asset management companies
established pursuant to laws within the PRC are required to submit a corporate governance report for
the prior year to the CIRC by May 15 in each year. The corporate governance report shall be drafted
under the leadership of the chairman, and submitted to the CIRC after reviewed and approved by the
board of directors, together with any dissenting opinions of independent directors on the contents of
the corporate governance report. Before the board of directors reviews the report, the nomination and
remuneration committee shall review the contents on incentive and restraint mechanism as set out in
part two of the Corporate Governance Report of Insurance Companies (保險公司治理報告), and the
audit committee shall review the contents on internal control assessment as set forth in part three and
on internal audit as set out in part four of the Corporate Governance Report of Insurance Companies.

Articles of Association

Insurance companies are required to formulate the basic contents of their articles of association
and set out the requirements on the formulation and modification procedures of the articles of

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association in accordance with the PRC Insurance Law, the PRC Company Law, the Opinions on
Regulating the Articles of Association of Insurance Companies (關於規範保險公司章程的意見)
(promulgated on July 8, 2008 and effective since October 1, 2008) and laws, regulations and
regulatory requirements.

On April 24, 2017, the CIRC issued the Guidelines on the Articles of Associations of Insurance
Company to further regulate the establishment of the articles of association of insurance company.
Among which, the articles of association of insurance company shall include “the shares of company
can be transferred in accordance with laws, subject to the relevant regulations of the CIRC and the
relevant regulatory authorities and the agreement in this articles of association. The shareholder shall
complete the relevant procedures of share transfer in accordance with laws for transferring shares of
company, and report to the company in written form within 15 working days after the signing date of
the shares transfer agreement. Company shall not provide financial assistance in form of loan or
guarantee to the directors, supervisors and senior management for purchasing the shares of the
company.”

The Company proposes to amend its articles of association in light of the requirements under the
Guidelines on the Articles of Associations of Insurance Company, which include further clarification
of shareholders’ rights and obligations, improvements on the authorization mechanisms for
shareholders’ and board meetings, improvements on voting mechanisms, improvements of relevant
rules relating to independent directors, provisions in respect of special rules for corporate governance.
Amongst these, amendments in respect to share transfer restrictions include: shareholders that are
transferring the Company’s shares shall follow relevant procedures in accordance with applicable laws
and shall, within 15 working days from the date of signing of the share transfer agreement, notify the
Company in writing. For shareholders transferring listed shares, we must comply with the applicable
laws, regulations and rules of the place of listing. The source of fund for the acquisition of the shares
and the holding of the shares of the Company must also be in compliance with applicable supervisory
regulations. Holding shares on behalf of another party or holding a percentage of shares that exceeds
the permitted amount are prohibited by law. Unless as required by laws, rules or regulations, any
shareholder must not withdraw their shares (i.e., have its shares repurchased). Any shareholders who
violates relevant laws, regulations and rules shall not be permitted to exercise any of its shareholder’s
rights including voting rights, entitlement to dividend and nomination rights, and shall undertake to
accept supervisory measures imposed by the CIRC including restrictions on shareholder’s rights,
orders to transfer its shares and other measures. The Amendments will not have any material adverse
impact on Shareholders’ rights, including but not limited to share transfer rights, of H-shares
shareholders.

The Company expects to effect the above changes to its articles of association prior to December
31, 2017 and will comply with the applicable requirements under the Listing Rules to effect these
amendments.

Internal Control, Compliance and Risk Management

Pursuant to the Principal Rules for the Internal Control of Insurance Companies
(保險公司內部控制基本準則) implemented on January 1, 2011, an insurance company must establish
an internal control organisational system with clear work allocation, clear working procedures,

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cooperation and highly efficient execution which the board of directors should ultimately be
responsible for, the management should directly lead, the internal control departments should
coordinate, the internal audit department should examine and supervise, and the business departments
should primarily be responsible for. Internal control activities of an insurance company shall cover
sales control, operation control, infrastructure management control and funds utilisation control.
Insurance companies are required to establish an internal control assessment system to perform annual
comprehensive assessment on the integrity, reasonableness and effectiveness of their internal control
system and prepare an internal control assessment report for review and approval by the board of
directors and submission to the CIRC.

Pursuant to the Risk Management Guidance for Insurance Companies (Pilot)


(保險公司風險管理指引(試行)) implemented on July 1, 2007, an insurance company is required to set
clear risk management objectives, establish an integrated risk management system, standardise risk
management process, adopt advanced risk management methods and means, and maximise efficiency
with appropriate level of risks. An insurance company must establish a risk management
organizational system which the board of directors should ultimately be responsible for, the
management should directly lead, the relevant functional departments should closely cooperate, and
should cover all business units based on the risk management organisation. An insurance company
shall identify and assess all types of major risks in the course of operation, including insurance risk,
market risk, credit risk and operational risk, and verify and evaluate the process and effectiveness of
risk management. Pursuant to the Guidance for Reputational Risk Management of Insurance
Companies (保險公司聲譽風險管理指引) implemented on February 19, 2014, an insurance company
is required to include reputational risk in its firm-wide risk management system, establish relevant
system and mechanism, prevent and identify reputational risk and handle and deal with reputational
events. The board of directors of an insurance company has ultimate responsibility for reputational
risk management. An insurance company must fully consider reputational risk in all aspects including
corporate governance, market behaviour, and information disclosure to prevent any risk affecting the
reputation of the company and the industry from occurring. In case of any reputational event, an
insurance company shall take prompt actions and control to prevent any individual reputational event
from damaging the general reputation of the industry and maintain a stable insurance market.

According to the Notice of the CIRC on Issuing the Work Rules for the Internal Audit of
Insurance Institutions (保險機構內部審計工作規範) issued and implemented on December 7, 2015, an
insurance company shall establish an independent internal audit system, conduct vertical management
of internal audit, and qualified insurance institutions are encouraged to conduct centralized
management of internal audit, and further strengthen the independence of the internal audit system.
An insurance company shall maintain a sufficient number of internal auditors.

Pursuant to the Notice of the CIRC on Matters Concerning Further Strengthening the Compliance
Management of Insurance Companies (中國保監會關於進一步加強保險公司合規管理工作有關問題
的通知) implemented on June 1, 2016, an insurance company shall: (1) establish sound requirements
on qualification for its compliance chief and clearly define the disqualifying situations; and (2)
comprehensively review the declaration requirements in the application materials about employment

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qualification; consolidate the requirements on employment qualification of the compliance chief in the
relevant documents, and uniformly stipulate the materials for employment qualification that should be
submitted by the compliance chief; (3) further strengthen the compliance management. The insurance
company shall clearly stipulate the work that directors, supervisors, senior management as well as
departments and branches of the insurance company shall support and cooperate with, and the
insurance company shall provide the necessary material resources, financial resources and technical
support for the compliance work.

According to the Measures for Compliance Management of Insurance Company


(保險公司合規管理辦法) formulated by the CIRC on December 30, 2016 and to be implemented on
July 1, 2017, an insurance company shall set up a compliance department and compliance positions,
and shall maintain compliance staff that meet the requirements. An insurance company shall ensure
the independence of the compliance management department and the compliance positions, and shall
carry out independent budgeting and evaluation for implementation. The compliance management
department and compliance positions shall be independent from departments such as the business,
finance, fund utilization and internal audit departments that may conflict with the duties of compliance
management. An insurance company shall establish a compliance management framework with three
lines of defense: Departments and branches of an insurance company perform the first line of defense
duties for compliance management, and be responsible for direct and first duties within their scope of
responsibilities; compliance management departments and compliance positions of an insurance
company perform the second line of defense duties of compliance management; while the internal
audit department of an insurance company perform the third line of defense duties of compliance
management, and carry out independent audit of the company’s compliance management on a regular
basis.

The board of directors of an insurance company shall bear the ultimate responsibility for the
compliance management of the company, and shall perform the following compliance duties: (1) to
consider and approve compliance policies, supervising implementation of the compliance policies and
conduct annual assessments on the implementation; (2) to review and approve and submit to the CIRC
annual compliance report of the company, and to propose solutions for issues reflected in the annual
compliance report; (3) to decide on the appointment, dismissal and remuneration of the compliance
chief; (4) to decide on the establishment of company’s compliance management and functions; (5) to
ensure that the compliance chief ’s independent communication with the board of directors and the
professional committees under the board of directors; and (6) other compliance duties as stipulated in
the articles of association of the company.

The board of directors of an insurance company may authorize professional committees to


perform the following compliance duties: (1) to review the annual compliance report of the company;
(2) to listen to reports on compliance matters by the compliance chief and the compliance management
department; (3) to supervise the compliance management of the company, to understand the
implementation of compliance policies and existing problems, and to provide comments and
suggestions to the board of directors; (4) other compliance duties as provided in the articles of
association of the company or determined by the board of directors.

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The supervisors or the board of supervisors of an insurance company shall perform the following
compliance duties: (1) to supervise the performance of compliance duties of directors and the senior
management; (2) to supervise the decision-making and compliance of decision processes of the board
of directors; (3) to propose dismissal of directors and senior management who cause material
compliance risks; (4) to propose to the board of directors replacement of the compliance chief of the
company; (5) to investigate the relevant circumstances of the compliance risks in the operation of the
company according to law and to request assistance of relevant senior management and departments;
(6) other compliance duties as stipulated in the articles of association of the company.

The general manager of an insurance company shall perform the following compliance duties: (1)
to establish and improve the organization structure of the company’s compliance management
according to decision of the board of directors, to establish the compliance management department,
and to provide sufficient conditions for the compliance chief and the compliance department to
perform their duties; (2) to review the compliance policies of the company, and to implement the same
after submission of the same for consideration of the board of directors; (3) to organize at least once
a year identification and evaluation of the compliance risks of the company, and to review the annual
compliance management plan of the company; (4) to review the annual compliance report of the
company and to submit the same to the board of directors or the professional committees under the
board of directors; (5) where irregular operating and management behaviors of the company are
identified, to promptly stop and correct the same, and to pursue corresponding responsibility of the
person responsible for the violation and report the same as required; (6) other compliance duties
provided by the articles of association and determined by the board of directors of the company.

Administration of Qualification of Directors, Supervisors and Senior Management

Pursuant to the Administration of Directors, Supervisors and Senior Management Qualifications


of Insurance Companies (保險公司董事、監事和高級管理人員任職資格管理規定) as amended and
implemented on January 23, 2014, senior management of an insurance company refers to the following
persons with a decision-making power or significant influence on the operation and management
activities and risk control of an insurance institution: (i) the general manager, deputy general manager
and assistant general manager of the head office; (ii) the board secretary, compliance controller, chief
actuary, chief financial officer and audit controller of the head office; (iii) the general manager, deputy
general manager and assistant general manager of branches and central sub-branches; (iv) the manager
of sub-branches and business departments; or (v) management officers with equivalent powers and
duties to the above senior management officers.

Directors, supervisors and senior management of an insurance institution shall obtain


qualification approved by the CIRC before assuming office.

The CIRC will not approve the qualification of any proposed director, supervisor or senior
management of an insurance institution if he is: (i) a person without legal capacity or with restricted
legal capacity; (ii) a person who has been sentenced to criminal punishment for corruption, bribery,
infringement of property, misappropriation of property or sabotaging social economic orders, or who
has been deprived of his political rights, in each case where not more than five years have elapsed

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since the date of the completion of such punishment or deprivation; (iii) a person who has been
sentenced to any other criminal penalty of other offences where no more than three years have elapsed
since the date of completion of such punishment; (iv) a person who has his qualification cancelled or
revoked by a financial regulatory authority, where no more than five years has elapsed since the date
of the cancellation or revocation of his qualification; (v) a person who has been barred from entering
into the market by a financial regulatory authority, where no more than five years has elapsed since
the date of the bar; (vi) a person who has been removed from public office by a government authority,
where no more than five years has elapsed since the date of removal from public office; (vii) a person
who is a former lawyer, certified public accountant or professional of a professional institution such
as asset valuation institution or certification institution, whose professional qualification has been
revoked because of a breach of law as a result of a non-compliance conduct, where no more than five
years have elapsed since the date of the revocation of his professional qualification; (viii) a person
who is a former director, factory manager or manager of a company or enterprise which has been
bankrupted and liquidated and he is personally liable for the bankruptcy of such company or
enterprise, where no more than three years have elapsed since the date of the completion of the
bankruptcy and liquidation of the company or enterprise; (ix) a person who is a former legal
representative of a company or enterprise which had its business license revoked due to a violation
of law and that person was responsible for such violation, where no more than three years has elapsed
since the date of the revocation of the business license; (x) a person who has a relatively large amount
of debts due and outstanding; (xi) a person who was subject to administrative penalty by the CIRC in
form of a warning or fine within one year immediately preceding the application for the approval of
his qualification; (xii) a person who is investigated by the CIRC because of suspected involvement in
serious illegal activity, which investigation is not yet concluded; (xiii) a person who was subject to
material administrative penalty by other administrative management department, where not more than
two years have elapsed since the date of the material administrative punishment; (xiv) a person who
has been sentenced to any criminal penalty outside of the PRC, where not more than five years since
the completion of such punishment have elapsed or, in case of administrative punishment due to a
serious violation of law, where not more than three years have lapsed since the date of the completion
of such administrative punishment; and (xv) a person with other circumstances provided by the CIRC.

Any person who served as a director, supervisor or senior management of an insurance company
subject to rectification or receivership and is directly responsible for such rectification or receivership
may not serve as a director, supervisor or senior management officer of other insurance institutions
during the period of rectification or receivership.

Pursuant to the Interim Measures on the Administration of Independent Directors of Insurance


Companies (保險公司獨立董事管理暫行辦法) promulgated and implemented on April 6, 2007, in
addition to the qualification required by the Administration of Directors, Supervisors and Senior
Management Officers Qualifications of Insurance Companies (保險公司董事、高級管理人員任職資
格管理規定), an independent director shall: (i) have a bachelor degree or above; (ii) for those serving
on the audit committee of the board of directors, have more than five years of work experience in the
financial or legal field; (iii) for those serving on the nomination and remuneration committee of the
board of directors, have a strong capability of identifying and using talent and managing
remunerations, and more than five years of working experience in a leading or management position
in enterprises, public institutions or government agencies; and (iv) other qualifications required by the
CIRC.

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A person may not serve as an independent director of an insurance company if he: (i) is a person
or a close relative of a person who has held a position in the past three years in a corporate shareholder
holding more than 5% of the shares of the insurance company or a corporate shareholder being one
of the top ten shareholders of the insurance company; (ii) is a person or a close relative of a person
who has held a position in the past three years in the insurance company or an enterprise effectively
controlled by such insurance company; (iii) has provided the insurance company with legal, audit,
actuarial and management consultancy services in the past one year; (iv) is a partner, controlling
shareholder or senior management officer of a bank, law firm, consultancy agency or audit firm with
business with the insurance company; or (v) has other capacity that is likely to affect his independent
judgment in the opinion of the CIRC.

An independent director may not hold a position in any other insurance company engaging in
similar principle activities, or serve as independent director in more than four enterprises at the same
time.

Before assuming office, in addition to submitting his qualification to the CIRC for approval
according to regulatory requirements, an independent director is also required to make a statement on
his independence through the media specified by the CIRC, and undertake to act diligently and to
commit adequate time and efforts in performing his duties.

Related Transactions

Pursuant to the PRC Insurance Law, an insurance company is required to establish rules on the
management of related transactions and information disclosure. The controlling shareholders, de facto
controlling persons, directors, supervisors and senior management of an insurance company are not
allowed to impair the interests of the insurance company through related transactions.

In addition to the requirements under the PRC Insurance Law, when entering into any related
transactions, an insurance company shall also comply with the Interim Provisions on Related
Transactions of Insurance Companies (保險公司關聯交易管理暫行辦法) implemented on 6 April
2007, the Notice of the CIRC on the Issues concerning Increased Regulation on Related Transactions
of Insurance Companies (中國保監會關於進一步規範保險公司關聯交易有關問題的通知)
implemented on April 1, 2015, and the Notice of the CIRC on the Issues concerning Increased
Strengthening of Information Disclosure of Related Transactions of Insurance Companies (中國保監
會關於進一步加強保險公司關聯交易信息披露工作有關問題的通知) implemented on June 30, 2016
under which an insurance company is required to formulate policies on related transactions and file
such policies with the CIRC. An insurance company is also required to identify related parties and
related transactions in accordance with the above requirements and report its major related
transactions to the CIRC within 15 working days of the execution of related transaction agreement.
Material related transactions are defined as a single transaction with a single related party involving
an amount of more than RMB30 million and no less than 1% of the net assets of the insurance company
as at the end of the preceding year, or transactions with a single related party in a fiscal year involving
an accumulated amount of not less than 5% of the net assets of the insurance company as at the end
of the preceding year. For material related transactions, apart from reporting and disclosures according
to the Interim Provisions on Related Transactions of Insurance Companies
(保險公司關聯交易管理暫行辦法) and the Measures for the Administration of Information Disclosure

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by Insurance Companies (保險公司信息披露管理辦法), the contents of reporting and disclosures shall


also be increased in accordance with Article 2 of the Notice of the CIRC on the Issues concerning
Increased Strengthening of Information Disclosure of Related Transactions of Insurance Companies
(中國保監會關於進一步加強保險公司關聯交易信息披露工作有關問題的通知). For related
transactions that need to be reported and disclosed on a case-by-case basis, insurance companies shall
report the same to the CIRC within 10 working days after signing the transaction agreements, and at
the same time disclose the same in the website of the company and the website of the Insurance
Association of China. Related transactions that need to be reported and disclosed on a case-by-case
basis refer to related transactions for use of funds, including the use of funds for investment purpose
and entrusted management of funds; a related asset transaction with a related natural person for an
amount of more than RMB300,000 or a related asset transaction with a related legal person for an
amount of more than RMB3,000,000, including the sale and purchase, lease and endowment of fixed
assets and intangible assets; a related interest transfer transaction with a related natural person for an
amount of more than RMB300,000 or a related interest transfer transaction with a related legal person
for an amount of more than RMB3,000,000, including the provision of financial assistance, transfer
or restructuring of debt interests or debts, and transaction activities by entering into an authorized
contract, donations, mortgages and other transactions that lead to the transfer of property or interest
of the company.

According to the Notice of the CIRC on Matters in relation to Further Strengthening Related
Transaction Management of Insurance Companies (中國保監會關於進一步加強保險公司關聯交易管
理有關事項的通知) promulgated by CIRC on June 23, 2017 and became effective from the same date,
general related transactions shall be approved under internal procedures and finally approved by or
filed with the related party transaction control committee or the audit committee; and significant
related party transactions shall, upon examination by the related party transaction control committee
or the audit committee, be submitted to the board of directors for approval pursuant to the relevant
provisions. CIRC identifies related parties and related transaction activities basing on substance rather
than forms and requires that insurance companies should follow the supervision requirements of
transparent management in insurance funds to monitor the flow of funds and establish an effective
control system of related party transactions. An insurance company intends to broaden usages of funds
and commence entrusted management business, it shall specify in a relevant agreement if any
underlying assets in which the funds are invested involve any related parties of the insurance company,
and the situation shall be examined pursuant to the relevant provisions on related party transactions
and reported to the CIRC.

Pursuant to the Standards for the Information Disclosure of Insurance Funds Deployment by
Insurance Company: No.1: Related Transactions (保險公司資金運用信息披露準則第1號:關聯交易)
implemented on May 19, 2014, the following activities involving insurance funds deployment between
an insurance company and its related party shall be disclosed: (i) placement of bank deposits (other
than demand deposit) with the related party; (ii) investment in the equity, real property and other
assets of the related party; (iii) investment in a financial product issued by the related party or the
underlying assets of which comprise the assets of the related party; and (iv) other related transactions
as determined by the CIRC. The information to be disclosed for the above related transactions include:
(i) transaction overview and basic information on the subject matter of the transaction; (ii) related
relationships between the parties and basic information on the related party; (iii) transaction pricing

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REGULATORY OVERVIEW

policy and basis; (iv) main contents of the transaction agreement, including consideration, settlement
method, conditions precedent, effective date, deadline for performance; (v) decision-making and
review of the transaction; and (vi) other information required to be disclosed in the opinion of the
CIRC.

If an insurance company enters into the above related transaction with its related party, it is
required to publish a disclosure announcement as required on the websites of the insurance company
and the Insurance Association of China within 10 working days of execution of the transaction
agreement or of the occurrence of the same if there is no such agreement.

The Standards for the Information Disclosure of Insurance Funds Deployment by Insurance
Company: No.1: Related Transactions (保險公司資金運用信息披露準則第1號:關聯交易) shall apply
to insurance group (holdings) companies and insurance asset management entities conducting any of
the above related transactions, as well as insurance asset management entities which set up a financial
product with its related party as counterparty or with the assets of the related party as underlying
assets.

According to Notice of the China Insurance Regulatory Commission on Matters Relating to


Strengthening Management of Related Party Transactions by Insurance Companies implemented on
June 23, 2017, an insurance company shall establish a related party transactions control committee or
appoint an audit committee to take charge of identification and maintaining of related parties,
management, examination, approval and risk control for related party transactions. General related
party transactions shall be examined and approved in accordance with internal procedures, and
ultimately approved by or filed with the related party transactions control committee or audit
committee for record; significant related party transactions shall, upon examination by the related
party transactions control committee or audit committee, and be submitted to the board of directors
for approval pursuant to the relevant provisions. Where an insurance company engages in utilization
of funds and entrusted management, it shall specify in the agreement that, where the underlying assets
in which the funds are invested involve a related party of the insurance company, the matter shall be
examined pursuant to the relevant provisions on related party transactions and reported to the CIRC.

External Guarantee

Pursuant to the Notice on Relevant Matters Regarding Regulating Guarantees Provided by


Insurance Entities (中國保監會關於規範保險機構對外擔保有關事項的通知) implemented on January
20, 2011, insurance companies and insurance asset management companies may not provide any
external guarantee other than (i) guarantees in litigation; (ii) credit guarantees relating to export credit
insurance operated by an export credit insurance company; and (iii) maritime guarantees.

Security Deposits

An insurance company is required by the PRC Insurance Law to make a security deposit which
amount to 20% of its total registered capital into a bank designated by the State Council’s insurance
regulatory authority. Such security deposit shall not be used for any purposes other than settling the
debts of such insurance company during liquidation proceedings.

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Pursuant to the Measures for the Administration of Security Deposits of Insurance Companies
(保險公司資本保證金管理辦法) amended and implemented on April 3, 2015, insurance companies
should choose more than two commercial banks as security deposit banks. Such security deposit banks
should satisfy the following requirements: (i) a state-owned commercial bank, a joint-stock
commercial bank, the Postal Savings Bank of China and a city commercial bank; (ii) having no less
than RMB20 billion net assets at the end of the immediately preceding year; (iii) their capital
adequacy ratio and non-performing asset ratio are in compliance with the relevant requirements of
banking industry regulatory authorities; (iv) having a sound corporate governance structure, internal
audit and control system and risk control system; (v) having no related party relations with the
company; and (vi) having no records of material non-compliance of laws or regulations in the past two
years.

Insurance companies can make security deposit in the form of: (i) fixed-term deposits; (ii)
large-amount agreement deposits; (iii) other forms approved by the CIRC.

The amount of each security deposit shall not be less than RMB10 million (or equivalent foreign
currency). If the increase in registered capital (working capital) of an insurance company is less than
RMB50 million (or equivalent foreign currency), a one-off security deposit which is equal to 20% of
the actual increase in capital shall be deposited. The term for deposits of the security deposits shall
not be shorter than one year. During the term of deposits, insurance companies are not allowed to
change the nature of the security deposits or use the security deposits for mortgage financing.

Reserves

Pursuant to requirements of the PRC Accounting Standards for Business Enterprises No. 25
—Original Insurance Contracts (企業會計準則第25號——原保險合同) implemented on February 15,
2006, the PRC Accounting Standards for Business Enterprises No. 26 — Reinsurance Contracts
(企業會計準則第26號——再保險合同) implemented on January 1, 2007, the Administrative Measures
on Reserves for Non-Life Insurance Business of Insurance Companies (Pilot) (保險公司非壽險業務準
備金管理辦法(試行)) implemented on 15 January 2005, and the Implementing Rules of Administrative
Measures on Reserves for Non-Life Insurance Business of Insurance Companies (Pilot)
(保險公司非壽險業務準備金管理辦法實施細則(試行)) implemented on January 15, 2005, insurance
companies must make allocations to the following reserves:

• Unearned premium reserves, which represents the reserves allocated at the date of
assessment for outstanding liabilities, including the reserves allocated for liabilities
undertaken for unexpired policies of one year or less in duration and the long-term reserves
allocated for liabilities undertaken for unexpired policies of greater than one year in
duration by insurance companies;

• Claim reserves: the reserves allocated by insurance companies for unsettled claims,
including reserves for incurred and reported claims, IBNR reserves and loss adjustment
expense reserves. Among them, reserves for incurred and reported claims are those reserves
allocated by insurance companies for incurred and reported claims but which insurance
companies haven’t settled yet. IBNR reserves are those reserves allocated by insurance
companies for incurred but not yet reported claims. Loss adjustment expense reserves are
those reserves allocated by insurance companies for the cost to be incurred for unsettled

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claims. The expenses provided for the services that are directly incurred by specific claims
cases, such as expenses for experts and lawyers and for damage inspections, are allocated
loss adjustment expenses (ALAE) reserves, and the amounts provided for expenses not
directly incurred by specific claims cases are unallocated loss adjustment expenses (ULAE)
reserves;

• Life insurance liability reserves refer to the reserves allocated for unexpired liabilities
undertaken in life insurance products;

• Long-term health insurance reserves refer to the reserves allocated for unexpired liabilities
undertaken in long-term health insurance products;

• Other reserves as required by the CIRC.

According to the Measures for the Administration of Health Insurance (健康保險管理辦法)


implemented on September 1, 2006, for those claim cases which insurance incidents occurred and has
been made claims but insurance companies yet not settle, insurance companies shall set aside incurred
and reported reserves. Insurance companies should take reasonable measures such as case-by-case loss
estimating method and average cost per claim method incurred to set aside incurred and reported
reserves carefully. If actuaries of insurance companies cannot confirm the reliability of estimation
methods or the experience data of related business is less than three years, insurance companies shall
set aside incurred and reported reserves in accordance with claiming amounts. For short-term health
insurance, insurance companies shall set aside claim reserves.

For life insurance reserve provisions, it also includes the Notice on Issuance of
Investment-linked Insurance Universal Insurance Actuarial Provisions (關於印發投資連結保險萬能保
險精算規定的通知) implemented on March 26, 2007.

According to the Insurance Companies Internal Management Specification on Non-life Reserves


Base Data, Assessment and Audit (保險公司非壽險業務準備金基礎數據、評估與核算內部控制規範)
implemented on July 1, 2012, insurance companies should pay attention to and strengthen reserve base
data quality control, establish work procedure and internal control systems, so as to regulate
information system data transmission standard and the data transmission among business, finance,
reinsurance, investment and other different systems. All underwriting, claims, reinsurance, expenses,
investment and other business activities should be completely recorded and preserved through
information systems, in order to ensure the authenticity, integrity, consistency and effectiveness of
data.

Pursuant to the Administrative Measures on the Retrospective Analysis of Reserves of Non-Life


Insurance Business of Insurance Companies (保險公司非壽險業務準備金回溯分析管理辦法)
effective as at May 17, 2012, retrospective analysis of reserves of non-life insurance business
comprises a retrospective analysis of unearned premium reserves and a retrospective analysis of claim
reserves. Claim reserves include incurred and reported reserves, incurred but not reported reserves,
and loss adjustment expense reserves. Insurance companies’ reserves retrospective analysis includes
two parts: annual reserve evaluation results retrospective analysis and regular quarterly reserve
evaluation results retrospective analysis. Annual reserve evaluation results retrospective analysis

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refers to insurance companies should calculate at the end of each quarter the deviation between
audited unearned premium reserves and evaluation value of claim reserves at the end of previous two
financial years and those as at the retrospective points, so as to determine the reserving adequacy in
audited annual financial statements. Regular quarterly reserve evaluation results retrospective analysis
refers to insurance companies should calculate at the end of each quarter the deviation between
unsettled claim reserves before previous two quarters and those as at the retrospective points. Through
analysing the deviation reasons, insurance companies can monitor the quality of basic data and
internal claim control, guide and dynamically adjust the evaluation results of that quarter. An
insurance company shall submit the reserve retrospective analysis report signed by the general
manager and the chief actuary (or the actuarial controller) to the CIRC on a regular basis. The general
manager of an insurance company shall be responsible for the truthfulness of the basic information and
the chief actuary (or the actuarial controller) shall be responsible for the methodology of the
retrospective analysis, the reasonableness of the assumptions, and the accuracy of the calculation
result.

Reserves Fund

According to the PRC Company Law, a company should, during distribution of after-tax net
profit of the current year, set aside 10% of the profit and contribute to its statutory reserves fund. For
a statutory reserves fund that reaches 50% of the company’s registered capital, no additional fund will
need to be set aside into the statutory reserves fund. When a company’s statutory reserves fund is not
sufficient to make up for losses in previous years, prior to contributing the statutory reserve in
accordance with the preceding paragraph, its profit of current year shall be used to make up for such
losses.

In addition to a statutory reserves fund set aside from its after-tax net profit, the company may
also set aside funds for a discretional reserves fund from its after-tax net profit upon passing a
resolution at an authorising shareholders’ meeting or shareholders’ general meeting.

The premium in excess of par value from the issuance of stocks of a joint stock company, and
other incomes contributed to the capital reserves fund as provided by the treasury departments of the
State Council, must be contributed to the company’s capital reserves.

Insurance Guarantee Fund

According to the provisions of the PRC Insurance Law, insurance companies shall pay the
insurance guarantee fund. Insurance guarantee fund should be under centralised management, and used
in a coordinated manner in the following situations:

• When an insurance company is deregistered or declared bankrupted, provide relief to the


policyholders, the insured or the beneficiaries;

• When an insurance company is deregistered or declared bankrupted, provide relief to the


insurance companies legally accepting its life insurance contracts;

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• Other cases specified by the State Council.

According to the Administrative Regulations on Insurance Guarantee Fund (保險保障基金管理


辦法) implemented on 11 September 2008, insurance companies shall pay the insurance guarantee
fund for property and casualty insurance business or life and health insurance business they operated
pursuant to the following regulations. Those insurance business which was paid insurance guarantee
fund would be covered by the insurance guarantee fund relief:

• 0.8% of the premium income for non-investment-type property and casualty insurance,
0.08% of the business revenue received for investment-type property and casualty
insurance with guaranteed return, and 0.05% of the business revenue received for
investment-type property and casualty insurance without guaranteed return;

• 0.15% of the business revenue received for life insurance with guaranteed return, and
0.05% of the business revenue received for life insurance without guaranteed return;

• 0.8% of the premium income for short-term health insurance, and 0.15% of the premium
income for long-term health insurance; and

• 0.8% of the premium income for non-investment-type accident insurance, 0.08% of the
business revenue received for investment-type accident insurance with guaranteed return,
and 0.05% of the business revenue received for investment-type accident insurance without
guaranteed return.

The above business revenue refers to full amount paid by the policyholder to the insurance
company in accordance with the insurance contract for the purchase of corresponding insurance
products.

Solvency Management

Solvency Management of Insurance Company

The solvency of an insurance company represents the ability of an insurance company to repay
its debt. According to the Administrative Provisions on the Solvency of Insurance Companies
(保險公司償付能力管理規定) which was implemented on September 1, 2008, an insurance company
shall have capital commensurate with its risks and business scale and shall ensure its solvency margin
ratio is not less than 100%. The “solvency margin ratio” refers to the ratio between an insurance
company’s actual capital and the minimum capital.

Under the PRC Insurance Law, the Administrative Provisions on the Solvency of Insurance
Companies (保險公司償付能力管理規定) and Notices of China Insurance Regulatory Commission on
Strengthening the Solvency Management of Insurance Companies (中國保險監督管理委員會關於保險
公司加強償付能力管理有關事項的通知) enforced from June 27, 2012, insurance companies shall
establish the internal solvency management system aligned with their business size, business structure
and risk characteristics, enhance capital control, so as to ensure adequate solvency.

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Insurance companies shall evaluate their solvency on a regular basis, calculate the minimum
capital and actual capital, and carry out dynamic solvency test pursuant to the Solvency Reporting
Standards for Insurance Companies formulated by the CIRC. In addition, risk-oriented solvency shall
also be evaluated as well.

Under the Solvency Reporting Standards for Insurance Companies and relevant regulations
complied by the CIRC, insurance companies shall formulate and submit solvency reports and ensure
the authenticity, accuracy, completeness and compliance of the reported information. Solvency reports
include annual reports, quarterly reports and interim reports.

As a part of overall risk management, insurance companies shall consolidate all influence factors
of solvency into the internal solvency management system, strengthen asset management, liability
management, matching management and capital management, timely identify, prevent and relieve
asset risk, underwriting risk, asset-liability mismatch risk, governance risk, operational risk and other
types of risks.

Insurance companies shall set up capital constraint mechanism and take the influences of
solvency into consideration while formulating development strategy, operational planning, product
design and insurance funds deployment, etc.

For an insurance company with solvency ratio of less than 150% of the regulatory requirement,
the lower of the following two factors shall be the basis for profit distribution:

(1) the distributable profit as ascertained under the Accounting Standards for Business
Enterprises;

(2) the residual overall income ascertained pursuant to the preparation rules of the insurance
company’s solvency report. Insurance companies shall develop capital plan, determine
capital demand in the future and hence propose a practical capital supplement plan, in
accordance with business development plans and based on the dynamic solvency test.
Insurance group companies shall formulate the capital plans from the perspectives of
business development and capital planning of member companies, propose capital
supplement plans and achieve proper capital allocation within the group on the basis of
overall consideration of capital demands for all member companies.

SOLVENCY SUPERVISION OF CIRC

According to the Administrative Provisions on the Solvency of Insurance Companies


(保險公司償付能力管理規定), the CIRC classifies insurance companies into three categories to
implement category-based supervision based on their solvency margins:

• inadequate solvency: insurance companies with solvency margin ratio of less than 100%;

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• adequate solvency I: insurance companies with solvency margin ratio of between 100% and
150%; and

• adequate solvency II: insurance companies with solvency margin ratio of higher than 150%.

For an insurance company in the category of inadequate solvency, the CIRC may take one or
several of the following regulatory measures:

• order the insurance company to increase its capital or restrict its distribution of dividends
to its shareholders;

• limit the compensation and spending of directors and senior management officers;

• impose restrictions on its commercial advertising;

• restrict the establishment of new branches, limit its business scope, or order it to cease
operating new business and to transfer its insurance business or cede its business;

• order an auction of the insurance company’s assets or restrict its purchases of fixed assets;

• restrict the channels for deployment of its insurance funds;

• change the controller and relevant management;

• put the insurance company into receivership; and

• other regulatory measures as deemed necessary by the CIRC.

Pursuant to the Solvency Reporting Standards for Insurance Companies and relevant regulations
promulgated by the CIRC, insurance companies shall formulate and submit solvency reports and
ensure the authenticity, accuracy, completeness and compliance of the reported information. Solvency
reports include annual reports, quarterly reports and interim reports.

An insurance company shall report to the CIRC within five business days from the date of the
occurrence of the following matters which have material adverse impacts on its solvency: (i)
significant investment losses; (ii) material compensation, large-scale surrender or suffering a major
lawsuit; (iii) its subsidiaries and joint ventures are experiencing financial crisis or taken over by
financial regulatory authorities; (iv) the head office of the branch of a foreign insurance company is
imposed with administrative penalties, is regulated with mandatory regulatory measures or is filed for
bankruptcy protection; (v) its parent company is experiencing financial crisis or taken over by
financial regulatory authorities; (vi) its major assets are frozen by judicial authorities or imposed with
major administrative penalties by other administrative authorities; (vii) other matters that have
material adverse impacts on its solvency.

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CHINA RISK ORIENTED SOLVENCY SYSTEM (C-ROSS)

According to the Regulatory Standards on Solvency of Insurance Company (Nos 1-17)


(保險公司償付能力監管規則(1-17號)) issued on February 13, 2015, the CIRC launched the
construction work of China Risk Oriented Solvency System (中國風險導向償付能力體系) (hereafter
referred to as “C-ROSS”) in 2012. Under the regulatory framework of the C-ROSS, solvency
supervision covers actual capital, minimum capital, life insurance contract liability valuation,
minimum capital for insurance risk (non-life insurance business), minimum capital for insurance risk
(life insurance business), minimum capital for insurance risk (reinsurance company), minimum capital
for market risk, minimum capital for credit risk, stress testing, overall risk rating (classified
supervision), solvency risk management requirements and evaluation, liquidity risk, solvency
information public disclosure, solvency information exchange, credit rating of insurance company,
solvency report and insurance group supervision.

According to the Notice of the Overall Framework of the Second-Generation Solvency


Supervision System of China (中國第二代償付能力監管制度體系整體框架) issued by the CIRC on
May 3, 2013, the overall framework of the C-ROSS regime comprises three parts: institutional
characteristics, supervisory pillars and supervisory foundation. The institutional characteristics
include: (i) one supervision, representing that subject to authorisation from the State Council, the
CIRC performs relevant administrative functions and implements unified supervision and management
of the insurance market of the PRC in accordance with relevant laws and regulations, such as
implementing unified supervision and management of solvency of all insurance companies in the PRC;
(ii) emerging market, representing that given the reality that the PRC’s insurance market is still an
emerging insurance market, the framework of the C-ROSS regime takes into consideration of the
characteristics of an emerging insurance market and strives to differentiate itself from a solvency
supervisory system which is suitable to a developed market; and (iii) risk-oriented with value
consideration, representing the balance between the objectives of risk warning and value assessment.
The supervisory foundation is a company’s solvency management. The supervisory pillars include: (i)
the first pillar, representing the quantitative capital requirements, which primarily focuses on
preventing the risks which could be quantified and requires an insurance company to have capital
commensurate with the risks it faces through scientifically identifying and quantifying different kinds
of risks; (ii) the second pillar, representing the qualitative supervisory requirements, which is on top
of the quantitative capital requirements and requires an insurance company to take precautions against
risks that are difficult to be quantified, such as operational risks, strategic risks, reputational risks and
liquidity risks, etc.; and (iii) the third pillar, representing market discipline mechanism, which
promotes and utilises the disciplinary power of markets through public disclosure to strengthen
supervision on insurance companies’ solvency so as to further prevent risks.

The three pillars are also applicable to the supervision of insurance groups. The substance and
requirements of group-level supervision involve all three pillars. Moreover, insurance groups typically
have risk diversification effects and they also face special risks different from those faced by an
individual insurance company. In developing specific supervisory standards for the three pillars, these
special risks should be taken into account and reflected accordingly.

There are three indicators to evaluate the solvency position of insurance undertakings: core
solvency margin ratio, aggregated solvency margin ratio and integrated risk rating.

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According to the Notices of China Insurance Regulatory Commission on Transitional Period of


China Risk Oriented Solvency System (中國保監會關於中國風險導向償付能力體系實施過渡期有關
事項的通知) promulgated on February 13, 2015, the PRC insurance authority has entered the trial
period for transition of the C-ROSS since the date of promulgation. During such transitional period,
insurance companies are obliged to formulated two solvency reports respectively in accordance with
the present solvency supervision system and the C-ROSS, with the present solvency supervision
system as the supervisory basis. According to the Notice of the CIRC on Issues Concerning the Formal
Implementation of the China Risk Oriented Solvency System (中國保監會關於正式實施中國風險導向
的償付能力體系有關事項的通知) promulgated on January 25, 2016, with the consent of the State
Council, the CIRC hereby decides to formally implement the C-ROSS and to implement the Solvency
Regulatory Rules for Insurance Companies (Nos 1-17) since January 1, 2016.

Subordinated Debts

Pursuant to the Measures for the Administration of Subordinated Term Debts of Insurance
Companies (保險公司次級定期債務管理辦法) amended on March 15, 2013, insurance companies
(including domestic insurance companies, joint venture insurance companies and foreign
wholly-owned insurance companies) may issue subordinated term debts.

“Subordinated debts” refers to debts with a maturity of five years or more issued with approval
by an insurance company for recovery of temporary and periodical capital insufficiency that are
subordinated to the policy liabilities and other obligations of the company but senior to the company’s
equity in terms of the ranking of principal repayment and interest payment. Funds raised by an
insurance company through subordinated debts may be counted in the company’s supplementary
capital, but may not be used to offset the daily operating loss. The amount of subordinated debts
incorporated into an insurance company’s supplemental capital shall not exceed 50% of its net assets
and the specific approval standards are subject to the CIRC’s requirements.

Insurance companies with existing solvency margin ratio lower than 150% or expected solvency
margin ratio in the coming two years lower than 150% may apply for issuance of subordinated debts.
Insurance companies applying for the issue of subordinated debts must satisfy the following
requirements: (i) having been established over three years; (ii) having audited net assets of no less
than RMB500 million at the end of the previous year; (iii) after the issuance, the accumulated
outstanding principal and interest of subordinated debts may not exceed 50% of the audited net assets
at the end of the previous year; (iv) being solvent; (v) having a sound corporate governance structure;
(vi) having an integrated internal control system which has been strictly complied with; (vii) having
no assets being occupied by any natural persons, legal persons or other entities who have effective
control over the assets or their related parties; (viii) having no record of being subject to material
administrative penalty for the past two years; and (ix) other requirements specified by the CIRC.

Issuance of subordinated debts by insurance group companies (or insurance holding companies)
could also apply the provisions of the Measures for the Administration of Subordinated Term Debts
of Insurance Companies (保險公司次級定期債務管理辦法).

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Subordinated debts issued by insurance companies may only be subscribed by qualified


investors. Qualified investors refer to domestic or overseas legal persons who possess abilities of
independent analysis and risk tolerance in respect of purchase of subordinated debts with the
exception of (i) any company under the control of the relevant issuer; and (ii) any company under the
common control with the relevant issuer of a third party.

Subordinated debts held by a single shareholder and controllers of such shareholder of an issuer
shall not exceed 10% of a single batch or accumulated amount of subordinated debts, and the
percentage of subordinated debts held by them for either a single batch or accumulated amount shall
not be the highest. Subordinated debts held accumulatively by all shareholders or all controllers of
shareholders of an issuer shall not exceed 20% of a single batch or accumulated amount. Any issuance
of subordinated debts in phases by an issuer should be counted as one single issue and be subject to
the aforesaid requirements.

Issuers may entrust China Government Securities Depository Trust & Clearing Co. Ltd. or China
Securities Depository and Clearing Co., Ltd as the registration and trustee agency of their
subordinated debts, and may entrust it to repay the principles and interests on their behalf. The use
of funds raised by issuance of subordinated debts should meet the relevant CIRC requirements and the
funds are not allowed to be used for equity, real property or infrastructure investments. Issuers may
repay principals and interests of subordinated debts only when they can make sure that they will have
a solvency margin ratio not lower than 100% after such repayment. Issuers may not distribute any
profits to their shareholders during any period when they are not able to repay any principals and
interests on time.

Issuers may set up redemption option over subordinated debts and redemption date shall be five
years from the date of issuance of subordinated debts. Subordinated debts contracts shall not provide
that creditors have put option over subordinated debts. If subordinated debts are redeemed in advance
according to the contracts, it shall ensure that insurance companies have a solvency margin ratio not
lower than 100%. Except for redemption option established pursuant to the above requirements,
issuers shall not redeem subordinated debts in advance.

Issuers shall, pursuant to the relevant CIRC requirements, prepare prospectus of subordinated
debts and other information disclosure documents and procure the true, accurate, complete and timely
disclosure of information that have substantive effect on issuing targets. Issuers and the relevant
parties shall not mislead investors to purchase subordinated debts in any manner.

Subordinated Convertible Bonds

Pursuant to the Circular on Issues Concerning the Issuance of Subordinated Convertible Bonds
by Listed Insurance Companies (中國保險監督管理委員會關於上市保險公司發行次級可轉換債券有
關事項的通知) implemented on May 15, 2012, “subordinated convertible bonds” refers to bonds
issued by listed insurance companies and listed insurance group companies in accordance with
statutory procedures with a maturity of five years or more, and the repayment of principal and the
payment of interests of which is subordinated to policy liabilities and other ordinary liabilities during

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bankruptcy settlement, which can be converted into shares pursuant to prescribed conditions within a
certain period. Subordinated convertible bonds can be incorporated into the company’s supplementary
capital before being converted into shares. The ratio and standard of subordinated convertible bonds
to be incorporated into supplementary capital are otherwise provided by the CIRC.

Listed insurance companies and listed insurance group companies applying for the issuance of
subordinated convertible bonds shall satisfy the following requirements as well as conditions provided
by securities regulatory authorities: (i) the repayment of principal and the payment of interests of
subordinated convertible bonds is subordinated to policy liabilities and other ordinary liabilities
during bankruptcy settlement; (ii) an insurance company shall not use its assets as mortgage or pledge
for its subordinated convertible bonds; (iii) the design of terms for subordinated convertible bonds
shall favour the facilitation of the conversion of subordinated convertible bonds into shares by their
holders; (iv) except for circumstances provided for by securities regulatory authorities, the issuer shall
not otherwise confer put option to a holder of subordinated convertible bonds.

Insurance Company Deregistration and Business Transfers

Under the PRC Insurance Law, where an insurance company needs to be dissolved as a result of
any split, merger, resolution of the shareholders’ meeting or occurrence of a cause of dissolution
prescribed in the articles of association of the company, it shall be dissolved upon the approval of the
insurance regulatory authorities under the State Council. An insurance company which operates the
life insurance business shall not be dissolved except for any split, merger or cancellation according
to law. Where an insurance company dissolves, it shall set up a liquidation team to proceed with
liquidation in accordance with law. Where an insurance company which operates the life insurance
business is deregistered or declared bankrupt according to law, it must assign its life insurance
contracts and liability reserves to another insurance company which operates the life insurance
business; where it cannot reach an assignment agreement with another insurance company, the
insurance regulatory authorities under the State Council shall designate an insurance company which
operates the life insurance business to accept the assignment.

Deployment of Insurance Funds

Legal Framework

In recent years, the CIRC has gradually loosened regulation on the deployment of insurance
funds, and the fields of insurance funds that can be invested in have been gradually increased.
Currently the important laws and regulations related to the deployment of insurance funds include:
PRC Insurance Law, the Interim Management Measures on the Deployment of Insurance Funds
(保險資金運用管理暫行辦法) amended on April 4, 2014 and implemented on May 1, 2014, the Interim
Measures for the Administration of Securities Investment Funds (保險公司投資證券投資基金管理暫
行辦法) implemented on January 17, 2003, the Provisional Regulations on Administration of Stock
Investment of Insurance Institutional Investors (保險機構投資者股票投資管理暫行辦法)
implemented on October 24, 2004, the Interim Measures for the Administration of Overseas

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Investment of Insurance Funds (保險資金境外投資管理暫行辦法) implemented on June 28, 2007, the


Notice of Regulating Insurance Agency’s Equity Investment Business (關於規範保險機構股票投資業
務的通知) implemented on March 18, 2009, the Interim Measures for Equity Investment with
Insurance Funds (保險資金投資股權暫行辦法) implemented on July 31, 2010, the Interim Measures
for the Investment of Insurance Funds in Real Estate (保險資金投資不動產暫行辦法) implemented on
July 31, 2010, the Detailed Rules for the Implementation of the Interim Measures for the
Administration of Overseas Investment with Insurance Funds (保險資金境外投資管理暫行辦法實施
細則) implemented on October 12, 2012, the Interim Measures for the Investment of Insurance Funds
in Bonds (保險資金投資債券暫行辦法) implemented on July 16, 2012, the Notice on Issues Relating
to the Investment in Equity and Real Property with Insurance Funds (關於保險資金投資股權和不動
產有關問題的通知) implemented on July 16, 2012, the Notice on the Investment with Insurance Funds
in Relevant Financial Products (關於保險資金投資有關金融產品的通知) implemented on October 12,
2012, the Interim Provisions for the Administration of Debt Investment Schemes for Infrastructure
(基礎設施債權投資計劃管理暫行規定) implemented on October 12, 2012, the Interim Measures for
the Participation of Insurance Funds in the Trading of Financial Derivatives
(保險資金參與金融衍生產品交易暫行辦法) implemented on October 12, 2012, Measures for the Pilot
Programme of Establishing Fund Management Companies by Insurance Institutions
(保險機構投資設立基金管理公司試點辦法) implemented on June 18, 2013, the Notice of the China
Insurance Regulatory Commission on Regulating the Bank Deposit Business for Insurance Funds
(關於規範保險資金銀行存款業務的通知) implemented on February 28, 2014, the Notice of the China
Insurance Regulatory Commission on Issues concerning the Investment of Insurance Funds in
Preferred Shares (關於保險資金投資優先股有關事項的通知) implemented on October 17, 2014, the
Circular on Strengthening and Improving the Oversight of the Percentages for the Application of
Insurance Proceeds (關於加強和改進保險資金運用比例監管的通知) (hereinafter referred to as
“Circular on Oversight of the Percentages”) implemented on January 23, 2014, the Circular on Matters
Relevant to the Investment of Insurance Capital in Venture Capital Funds (關於保險資金投資創業投
資基金有關事項的通知) implemented on December 12, 2014, the Notice of the China Insurance
Regulatory Commission on Adjusting the Policies Relating to Overseas Investment with Insurance
Funds (關於調整保險資金境外投資有關政策的通知) implemented on March 27, 2015 , the Interim
Measures for the Management of Asset-Backed Plan Business (資產支持計劃業務管理暫行辦法)
implemented on August 25, 2015, the Notice of the CIRC on Matters Concerning Strengthening
Prudential Supervision of Asset Allocation of Insurance Companies (中國保監會關於加強保險公司資
產配置審慎性監管有關事項的通知) implemented on December 3, 2015, the Guidelines on Internal
Control of Insurance Funds (保險資金運用內部控制指引)(GICIF) and the Application Guideline No.
1on Internal Control of Insurance Funds— Bank Deposits (保險資金運用內部控制應用指引第1號—銀
行存款), the Application Guideline No. 2 on Internal Control of Insurance Funds —Fixed Return
Investment (保險資金運用內部控制應用指引第2號—固定收益投資), the Application Guideline No. 3
on Internal Control of Insurance Funds — Stock and Equity Funds (保險資金運用內部控制應用指引
第3號—股票及股票型基金) implemented on January 1, 2016, the Guideline No. 4 on Information
Disclosure for the Use of Funds by Insurance Companies: Investment in Large Amount Unlisted
Equity and Large Real Estate (保險公司資金運用信息披露準則第4號:大額未上市股權和大額不動產
投資) implemented on May 4, 2016, the Notice on Strengthening Regulation of Portfolio Insurance
Asset Management Products and Businesses (關於加強組合類保險資產管理產品業務監管的通知)
implemented on June 13, 2016, the Administrative Measures for the Indirect Investment of Insurance
Funds in Infrastructure Projects (保險資金間接投資基礎設施項目管理辦法) (“Administrative
Measures”) implemented on August 1, 2016, and the Circular on Matters relating to the Further

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Enhanced Regulation of Stock Investment with Insurance Funds (關於進一步加強保險資金股票投資


監管有關事項的通知) implemented on January 24, 2017. Notice of the China Insurance Regulatory
Commission on Matters Relating to the Investment in Public-Private-Partnership Projects with
Insurance Funds (中國保監會關於保險資金投資政府和社會資本合作項目有關事項的通知)
implemented on May 4, 2017. Notice of the China Insurance Regulatory Commission on the Matters
Relating to the Investment in Major Project though the Debt Investment Scheme (中國保監會關於債
權投資計劃投資重大工程有關事項的通知) implemented on May 16, 2017.

The Several Opinions of the State Council on Accelerating the Development of the Modern
Insurance Service Industry (國務院關於加快發展現代保險服務業的若干意見), promulgated on
August 10, 2014, stated that “the distinct advantage of insurance long-term funds should be made full
use. Under the precondition of security and profitability, promote innovations to insurance fund
deployment and improve the efficiency of fund allocation. The deployment of insurance funds to
promote projects such as infrastructure construction, shanty town renovation, urbanisation and
national major projects through debt investment plan and equity investment plan will be encouraged.
Insurance companies should be encouraged to provide financial support to technology enterprises,
small and micro companies, strategic emerging industries through various approaches such as equity
interest investment, bond investment, funds and asset-backed plans, with the precondition that risks
are properly controlled. The research on policies for insurance funds to invest into venture capital
funds should be carried forward.” According to this document, the investment field of insurance funds
will be further expanded.

Applicable Areas

Bank Deposits

Pursuant to PRC Insurance Law, the Interim Measures for the Administration of Deployment of
Insurance Funds (保險資金運用管理暫行辦法), and the Notice of the China Insurance Regulatory
Commission on Regulating the Bank Deposit Business for Insurance Funds (關於規範保險資金銀行
存款業務的通知), the insurance fund could be deployed for bank deposits, and an insurance company
shall incorporate its bank deposits other than demand deposits as needed in maintaining its routine
operations into the administration of investment accounts, strictly implement the rules for credit
assessment, investment decision-making, and risk management improve the management of
operational procedures such as the opening of accounts, transfer of funds, and safekeeping of
documents, and procure operations in compliance with regulations.

When an insurance company makes bank deposit, the deposit bank should satisfy the following
conditions and shall have a long-term credit rating of A or equivalent to A or above for the latest year:

• capital adequacy ratio, net assets and provision coverage ratio satisfy regulatory
requirements;

• having a normative governance regulatory structure, integrated internal control system and
sound operating results;

• no material violations of laws or regulations found for the past three years; and

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• having a credit rating above investment grade for three consecutive years.

When an insurance company makes bank deposit, it should choose a commercial bank with
insurance fund custodian qualification or a third-party custody should be implemented by other
professional financial institutions, so as to prevent the risk of fund misappropriation. The duties of a
fund custodian include, at least, keeping document, interest settlement and cash withdraw, financial
accounting, investment supervision and information reports.

Any insurance company shall not use its bank deposit for providing pledge financing to others,
guarantees, entrusted loans or seeking benefits for others. If an insurance company finances itself by
pledging its bank deposits, the obtained funds should be primarily used for the needs such as
temporary position adjustments and large-amount insurance claims, the amount of financing will be
covered by the financial leverage ratio management.

An insurance company shall promptly report banking deposits information in accordance with
the related regulations. Insurance companies that pledged bank deposits for their own financing should
report transaction by transaction, and its trustee agency should do the same.

Bonds

Pursuant to the Interim Measures for the Administration of Deployment of Insurance Funds
(保險資金運用管理暫行辦法) and the Interim Measures on Bonds Investment with Insurance Funds
(保險資金投資債券暫行辦法), bonds invested by insurance funds shall attain the credit rating as
assessed by credit rating agencies recognised by the CIRC and comply with the stipulated credit rating
requirements, which mainly comprise government bonds, finance bonds, enterprise (corporate) bonds,
non-financial enterprise debt financing tools and other bonds that meets the regulatory requirements.
The Interim Measures on Bonds Investment with Insurance Funds (保險資金投資債券暫行辦法) also
states that insurance funds can be deployed to invest in RMB bonds and foreign currency bonds legally
issued in the PRC, including government bonds, potential government bonds, enterprise (corporate)
bonds and other bonds that meets the regulatory requirements.

Equity of Listed Companies

Pursuant to the Notice of the China Insurance Regulatory Commission on Regulating the Stock
Investment Business of Insurance Institutions (關於規範保險機構股票投資業務的通知), an insurance
company shall, in light of the characteristics of insurance funds and its solvency, uniformly allocate
the domestic and overseas stock assets and reasonably determine the stock investment scale and
proportion.

According to the Notice of the CIRC on Matters in relation to Further Enhanced Regulation of
Stock Investment with Insurance Funds (中國保監會關於進一步加強保險資金股票投資監管有關事項
的通知) promulgated by CIRC on January 24, 2017 and became effective from the same date,
investment in listed companies’ shares by insurance institutions or insurance institutions with
non-insurance parties acting in concert can be categorized into three types, namely general stock

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investment, substantial stock investment and acquisition of listed companies, and CIRC implements
differential supervision criteria in accord with actual situations. An insurance institution which
engages in general stock investment shall have a solvency margin ratio no less than 100% in the last
quarter, while an insurance institution which engages in substantial stock investment and acquisition
of listed companies shall have a solvency margin ratio no less than 150% in the last quarter and shall
report it investment management capability to the competent authorities and fulfil its internal control
requirements in relation to deployment of insurance funds. An insurance institutions can apply its
insurance funds for investment in listed companies’ shares and is free to choose industries for its
investment but shall make rational investment choices in accord with sources, costs and durations of
the funds and the investment shall be beneficial to asset-liability management and has synergy to its
core business, i.e., its insurance business.

An insurance institution shall finance its acquisition of listed companies by its self-owned funds.
No insurance institution can acquire listed companies jointly with non-insurance parties acting in
concert, neither shall it pledge its stock investments for securing funds for investment in listed
companies’ stocks.

When an insurance institution engages in substantial stock investment with non-insurance parties
acting in concert, it shall apply its self-owned funds for further investment in such listed companies
upon reporting to the competent authorities of its previous substantial stock investments.

The industry scope of listed companies which may be acquired by insurance organizations shall
be restricted to insurance enterprises, non-insurance financial enterprises, and industries which are
related to insurance business, comply with State industry policies and have stable expected cash flow
return; insurance organizations shall not acquire listed companies which are high pollution or high
energy consumption, fail to attain energy conservation and environmental standards of the State, or
have lower technology value-added.

An insurance institution shall submit a report including investment and research, internal
decision-making, subsequent investment plan and risk management measure to the CIRC when its
investment in a listed company is over 5% issued shares of such company; the insurance institution
shall summit a report including investment and research, internal decision-making, subsequent
investment plan and risk management measure to the CIRC and summit the source of investment fund
to the CIRC for filing when it meets the standard of signification equity investment; the insurance
institution shall apply for approval from the CIRC in advance when it wishes to acquire a listed
company.

Securities Investment Funds

Pursuant to the Interim Measures for the Administration of Securities Investment Funds
(保險公司投資證券投資基金管理暫行辦法), insurance funds can invest in the securities investment
funds set up or regulated by the Interim Measures for the Administration of Securities Investment
Funds (證券投資基金管理暫行辦法).

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Equity of Unlisted Companies and Equity Investment Funds

Pursuant to the Interim Measures for Equity Investment with Insurance Funds (保險資金投資股
權暫行辦法) and the Notice on Issues Relating to the Investment in Equity and Real Property with
Insurance Funds (關於保險資金投資股權和不動產有關問題的通知), insurance company can invest in
unlisted corporate shares and equity investment funds.

An enterprise to which direct or indirect equity investment is made with insurance funds shall
satisfy the following conditions:

(1) It was legally registered and formed and has the legal person status;

(2) It complies with the industrial policies of the state and has the qualifications prescribed by
the relevant departments of the state;

(3) Its shareholders and senior managements have a good credit and good business reputation;

(4) Its industry is at the stage of growth or maturity or is a strategical emerging industry, or
it has the specific intent of going public and has relatively high value for mergers and
acquisitions;

(5) It has advantages in terms of market, technologies, resources, or competition and has room
for value appreciation, expects good cash returns and has a specific dividend system;

(6) Its management team has the professional knowledge, industrial experience and
management ability appropriate for performing its functions;

(7) It is not involved in any major legal disputes, the property rights of its assets are integrated
and intact, and there is no legal defect in its equities or ownership;

(8) It has no affiliated relationship with any insurance company, investment institution or
professional institution, except for the relationships permitted by regulatory provisions, and
have been reported and disclosed in advance; and

(9) It satisfied other prudent conditions as prescribed by the CIRC.

No insurance funds shall be invested in the equity of an enterprise which does not comply with
the industrial policies of the state, has no prospect for a stable cash return or appreciation in asset
value, emits high pollution or is a high energy-consuming project, fails to reach the national standards
on energy conservation or environmental protection, has relatively low added value in technology.
Neither shall insurance funds be invested in venture capital, venture capital funds, establishment of
or equity investment in investment institutions.

An insurance company that invests in the equities of insurance-like enterprises is not governed
by the preceding paragraphs (2), (4), (5), (8).

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Equity directly invested by insurance funds is limited to the equity of insurance enterprise,
non-insurance financial enterprise, and pension agency, medical institution, automotive services
company, energy enterprise, resources enterprise, modern agricultural enterprise and new trade
circulation enterprise that related to insurance business.

According to the provisions of the Trial Measures on the Investment in and Establishment of
Fund Management Companies by Insurance Agencies (保險機構投資設立基金管理公司試點辦法),
insurance institutions (including insurance companies, insurance (holding) companies, insurance asset
management companies and other insurance institutions) are allowed to invest in and establish fund
management companies, and engage in the fund management business. The investment in and
establishment of a fund management company shall comply with the above requirements related to
equity investment and be subject to the regulatory opinions from the CIRC regarding to the investment
in the fund management company. The insurance institution shall make an application to the CSRC
after obtaining such regulatory opinions, and then may establish the fund management company by
way of establishment or through the acquisition of equity interests after such approval has obtained.
The insurance institution and the fund management company invested and established by it shall set
up sound corporate governance, and a risk-insolation system between the insurance institution and the
fund management company interested and established by it in strict compliance with the principle of
“separate legal entities”. Subject to the compliance with relevant laws and regulations as well as
regulatory requirements, the insurance institution may invest in fund products issued by the fund
management company invested and established by it, and may also provide financial assistance for
such company. However, the insurance institution shall not conduct transactions with the fund
management company invested and established by it on terms that are more favourable than those
offered to independent third parties in similar transactions in the inter-bank market, the exchange
market and other markets. The CIRC shall implement consolidated reporting supervision over fund
management companies established by insurance agencies.

According to the Notice on Issues Relating to the Investment in Equity and Real Property with
Insurance Funds (關於保險資金投資股權和不動產有關問題的通知), equity funds that invested by
insurance funds includes growth funds, mergers and acquisition funds, emerging strategic industry
funds and fund of funds that targets on the above equity funds. Among them, the investment targets
of mergers and acquisition funds may include publicly traded stocks, but only limited in non-trading
transactions like strategic investment, private placement, block transaction. The investment targets of
emerging strategic industry funds may include financial services company equity, pension agency
equity, medical enterprise equity, and modern agricultural enterprise equity and the equity of the
enterprises that invest in construction, administration, and operation of public rental housing or
low-rent housing. Transaction structure of fund of funds should be simple and clear and shall not
include other fund of funds.

Real Estate

According to the Notice on Issues Relating to the Investment in Equity and Real Property with
Insurance Funds (關於保險資金投資股權和不動產有關問題的通知), insurance companies investing
in real estate projects should clearly state the position of investors and commission the qualified
development institutions to construct the projects; they shall not develop their own construction
investment projects and shall not appropriate the insurance funds.

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Insurance companies invest in real estate may not aim on investment-purpose real estate and
participate in primary land development in the name of self-use real estate. When an insurance
company converts self-use real estate to investment-purpose real estate, the reason and the necessity
of the conversion should be fully demonstrated and ensure the fairness of the conversion value, and
it shall not take advantage of asset reallocation to transfer benefits or harm the interests of
policyholders.

Insurance funds may be invested in the real estate that satisfies the following conditions:

• Projects with a state-owned land use right certificate and a license for construction land use
planning;

• Projects under construction with a state-owned land use right certificate, a license for
construction land use planning, a license for construction project planning and a
construction license;

• Transferable projects with a state-owned land use right certificate, a license for
construction land use planning, a license for construction project planning, a construction
license, and a presale license or sale license;

• Projects with a property certificate or certificate of other rights; and

• Qualified government land reserve projects.

The real estate invested with insurance funds shall have clear property rights with no dispute
with respect to ownership, have complete, legal and effective right certificates, and be located in a
municipality directly under the Central Government, provincial capital city, city under separate state
planning, or a city with obvious location advantages. The management rights shall be relatively
centralised so as to satisfy the requirements for insurance asset allocation and risk control.

Insurance funds may invest in the financial product related to real estate and should satisfy the
following conditions:

• the investment institutions are in line with Article 9 of the Interim Measures for the
Investment of Insurance Funds in Real Estate (保險資金投資不動產暫行辦法);

• it is approved by the relevant government authorities, initiated or issued in China, and


supervised by a professional team;

• the underlying assets and invested real estate is located in China and in line with the
above-mentioned conditions when insurance funds directly invest in real estate;

• it implements an asset custody system and establishes a risk-insulation mechanism;

• it has a clear investment objective, investment scheme, follow-up management plan,


income distribution system, liquidity and settlement arrangements;

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• the transaction structure is clear, risk alarm is sufficient, and information disclosure is
truthful and complete;

• it has a registration or bookkeeping arrangement to meet the needs of market transactions


or transfer agreement; and

• it satisfies other prudent conditions as prescribed by the CIRC.

Real estate-related financial product is a fixed-income product and should have a long-term
credit rating of, or equivalent to, AA or above, which is assessed by domestic credit rating agency
approved by the CIRC, and provide legal and valid credit enhancement arrangements; for equity
product, an appropriate investment rights protection mechanism should be established.

Insurance companies which invest in real properties must not engage in the following activities:

• offering unsecured debt financings;

• providing mortgage guarantee with their invested properties;

• investing in the development or sale of commercial residential properties;

• directly conducting the development of residential properties (including the development of


tier-one land);

• investing in the establishment of real estate development companies or in the equity of


unlisted real estate enterprises (excluding project companies), or controlling real estate
enterprises by purchasing their shares. Insurance companies which have invested in and
established or controlled any real estate enterprises must exit or transfer the shares to other
parties within a specified period;

• investing in real properties with funds raised by borrowing, issuing debt, repurchasing and
lending, unless debt issuance is otherwise permitted by the CIRC;

• violating the requirements stipulated in the Interim Measures for the Investment of
Insurance Funds in Real Estate with respect to investment proportion;

• other activities prohibited by the CIRC as well as laws and regulations.

Infrastructure

Pursuant to the Administrative Measures for the Pilot Indirect Investment of Insurance Funds in
the Infrastructure Projects (保險資金間接投資基礎設施項目試點管理辦法) (hereinafter referred to as
the “Administrative Measures”), insurance funds can be invested in qualified infrastructure project
through trustees. The infrastructure project indirectly invested by insurance funds, in the

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Administrative Measures, refers to the principal entrusts its insurance funds to the trustee, according
to the wishes of the principal, the trustee, in his own name, develops an investment plan and invest
in infrastructure project, for the interest of the beneficiary or other specific purposes to manage or
dispose.

Pursuant to the Interim Administrative Provisions on the Infrastructure Debt Investment Scheme
(基礎設施債權投資計畫管理暫行規定), an infrastructure debt investment scheme refers to a financial
product, by which an insurance asset management company and other professional management
institution (“professional management institution”), as trustee, issue beneficiary certificates to
principals, the Administrative Measures and Interim Administrative products on the Infrastructure
Debt Investment Scheme, and the raised fund is used to invest in infrastructure projects by way of debt
and pay the expected return and repay the principals as well as interests.

A debt investment scheme of a professional management institution shall comply with the
following requirements: (i) the professional management institution has signed investment contract
with the indebted body, the underlying assets of the product is clear; the investment and investment
strategy direction of fund raising is in line with the state macroeconomic policy, industrial policy,
regulatory policy and relevant regulations; (ii) the transaction structure is clear, and an investor rights
protection mechanism is established; (iii) the interests in the debt investment scheme are divided into
equal shares; and (iv) it meets other product requirements as provided by the CIRC. A debt investment
scheme of a professional administrative institution shall ensure effective credit enhancement, and
satisfy the following requirements:

(i) Credit enhancement mode and the sources of repayment funds of the underlying project
company are independent of one another.

(ii) Credit enhancement adopts the following measures or a combination of these measures:

(a) Class A enhancement mode: state special fund, policy-related bank, state-owned bank
or joint-stock commercial bank whose credit rating achieved AA level or above in the
previous year, provides unconditional and irrevocable joint liability guaranty with
principal and interest in full. If a provincial branch of the above banks provides such
guarantee, it shall provide legal documents authorised by its head office and explain
its guarantee limit and the guarantee amount that already provided.

(b) Class B enhancement mode: legally established enterprise (company), which was
incorporated in China, provides unconditional and irrevocable joint liability guaranty
with principal and interest in full and satisfies the following conditions:

(1) the guarantor’s credit rating shall not be less than the credit rating of the
indebted body;

(2) if the issuing scale of the debt investment scheme is no more than RMB2 billion,
the net assets of the guarantor at the end of the previous year shall not be less
than RMB6 billion; if the issuing scale of the creditor’s right investment scheme
is above RMB2 billion and no more than RMB3 billion, the net assets of the

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guarantor at the end of the previous year shall not be less than RMB10 billion;
if the issuing scale of the debt investment scheme is more than RMB3 billion, the
net assets of the guarantor at the end of the previous year shall not be less than
RMB15 billion;

(3) the proportion between the total guarantee amount of the same guarantor to its
net assets should not exceed 50%. All guarantee amount and the net assets should
calculate and determine according to the scope of the assets the guarantee body
provides;

(4) if the parent company or actual controller of an indebted body provides


guarantee, the net assets of the guarantor shall not be less than 1.5 times of the
net assets of the indebted body;

(5) all legal formalities for providing guarantees have been handled.

(c) Class C enhancement mode: provide listed tradable shares, which has high liquidity
and full right of disposal, and whose fair value is not less than 2 times of debt value,
as collateral security, or provide right of charge, which can be transferred according
to law, as collateral guarantee, or provide physical assets with value-added potential
and easy realisation, which the guarantor has right to dispose of in accordance with
the law and no other right attached, as collateral. Collateral should be registered, and
mortgaged should be ranked first in terms of real right, the collateral value shall not
be less than 2 times the value of debt.

The fair value of the pledged assets shall be assessed by the assessment agency with the
highest professional qualifications, and be re-evaluated at least once a year. If the value of
collateral assets declines or a liquidity risk occurs, which may impact the property safety
of creditor’s right investment scheme, the relevant professional management agency should
take timely measures like start stop-loss mechanism, increase guarantee body, add legal and
sufficient collateral to ensure the guarantee is sufficient and effective.

If a creditor’s right investment scheme meets the following conditions, it may be exempted
from the credit enhancement:

(1) the net assets of the debt body in the last two fiscal years was not less than RMB30
billion, its annual revenues is no less than RMB50 billion, and in accordance with the
requirements in the Administrative Measures and the Interim Administrative
Provisions on the Creditor’s Right Investment Scheme of Infrastructure
(基礎設施債權投資計劃管理暫行規定);

(2) the indebted body has issued unsecured bonds over the last two years, and the credit
rating of the indebted body and the issued bonds were both graded as AAA level;

(3) the issuing scale of the bonds was no more than RMB3 billion.

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Preferred Shares

Pursuant to the Notice of the China Insurance Regulatory Commission on Issues concerning the
Investment of Insurance Funds in Preferred Shares (關於保險資金投資優先股有關事項的通知), the
term “preferred shares”, in which insurance funds are allowed to invest, means a class of shares
prescribed in addition to common shares in accordance with relevant laws and regulations of China,
the holders of which have priority over those of common shares in the distribution of profits and
residual assets but have restricted rights in decision-making and management of the company.
Preferred shares include those publicly offered and non-publicly offered.

Preferred shares in which insurance funds invest shall have a long-term credit rating of, or
equivalent to, A or above. Preferred shares in which insurance funds invest shall be rated by credit
rating agencies, which approved by the CIRC; the credit rating of preferred shares, in principle, should
be at least two levels below the credit rating of the recent ordinary debt or at least one level below
the credit rating of subordinated debt (if both of them exist, subject to the lower level). If an issuer
has recently issued ordinary or subordinated debt and it has been graded by the early-mentioned rating
agencies and existed, the credit rating of preferred stock can be directly determined by the rating
agencies in accordance with the above principle.

Venture Capital Fund

Pursuant to the Notice of the China Insurance Regulatory Commission on Matters concerning the
Investment of Insurance Funds in Venture Capital Funds (關於保險資金投資創業投資基金有關事項的
通知), insurance funds can be invested in private equity funds that established accordance with the law
and administered by qualified fund management institutions. The said private equity funds mainly
invest ordinary shares of venture company or preferred stock that can be lawfully converted into
ordinary shares, convertible bonds and other equity.

A fund management institution that invests insurance funds in venture capital funds shall satisfy
the following conditions:

• It shall be established according to the law, with sound and effective corporate governance,
internal control mechanism and management system, over 5 years of experience in venture
capital management, outstanding historical performance, and accumulative size of venture
capital asset under management no less than RMB1 billion;

• It shall have arranged an exclusive and stable management team with at least five
investment professionals, no less than a total of ten venture capital projects from which it
successfully exited, at least three investment professionals who have been working together
for five years, and investment decision-makers with more than five years of experience in
venture capital management, including at least two people with more than three years of
experience in enterprise management and operation;

• It shall have established an incentive and restraint mechanism, a follow-up investment


mechanism, an asset custody mechanism and a risk isolation mechanism, and there is no
conflict of interest between the different assets that it manages;

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• It shall answer the questions involving investment of insurance funds asked by the CIRC,
and report the relevant situation;

• It has no record of significant violation of laws in the past three years.

Venture capital funds in which insurance funds invest should not be the first venture capital fund
administered by fund management institution, and it shall satisfy the following conditions:

• Venture company invested by insurance funds should be established in China by law and in
line with state industrial policy, with an excellent management team and strong growth
potential, the key management personnel of the company should have no record of serious
violation of law;

• The size of each fund shall not exceed RMB500 million;

• The balance invested in a single venture equity by a single fund shall not exceed 10% of
the size of the fund raising;

• The fund balance invested or subscribed by general partner of an fund (or fund management
institution) and related parties, key management personnel of the fund shall not be less than
3% of the total size of the fund raising.

Securitised Financial Products

Pursuant to the Circular on Investment in Relevant Financial Products with Insurance Proceeds
(關於保險資金投資有關金融產品的通知), insurance funds may invest in the wealth management
products of commercial banks, in accordance with law, credit asset-backed securities of the banking
financial institutions, collective assets trust schemes of trust companies, special assets management
schemes of securities companies, infrastructure investment schemes of insurance assets management
companies, real estate investment schemes, project asset-backed schemes and other financial products.

Financial Derivatives

According to the Interim Measures on the Participation of Insurance Funds in Financial


Derivatives Trading (保險資金參與金融衍生產品交易暫行辦法), insurance (holding) companies or
insurance companies may participate in financial derivatives trading (hereinafter referred to as the
“derivatives trading”) and subject to the Measures and relevant requirements, may also entrust
insurance asset management companies and other professional management institutions which meet
requirements of the CIRC to participate in derivatives trading within the scope of authorisation.
Financial derivatives shall refer to domestic derivatives trading, excluding offshore derivatives
trading.

Financial derivatives refer to financial contracts whose values rely on one or more fundamental
assets, indicators or special events, including forwards, futures, options and swaps. Insurance
institutions’ participation in financial derivatives trading is limited to hedging or avoiding risks and
not for speculation purposes.

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Overseas Investment

Pursuant to the Interim Measures for the Administration of Overseas Investment with Insurance
Funds (保險資金境外投資管理暫行辦法) and the Detailed Rules for the Implementation of the Interim
Measures for the Administration of Overseas Investment with Insurance Funds (保險資金境外投資管
理暫行辦法實施細則), if an insurance company plans to be in the engagement of overseas investments
with insurance funds, it shall file an application with the CIRC and ask for approval. A sponsor who
has been approved by the CIRC to be in the engagement of the business of overseas investment with
insurance funds shall file an application with the SAFE for the quota for foreign exchange remittance
due to overseas investment.

When conducting overseas investments, insurance funds shall select the financial markets in the
countries and regions listed in the Detailed Rules for the Implementation of the Interim Measures for
the Administration of Overseas Investment with Insurance Funds (保險資金境外投資管理暫行辦法實
施細則) and invest in the following types of products:

(1) Money market products

Money market tools or products such as commercial notes with a term less than one year, bank
notes, significant and transferable certificate of deposit, reverse repos and short-term treasury bonds
and overnight loans. The issuers of the money market products (including securities pledged under
reverse repo) must have a credit rating of A or above.

(2) Fixed income products

Fixed income products include bank deposits, government bonds, government-backed bonds,
supranational financial institution bonds and corporate bonds and convertible bond.

Bonds should be denominated in a major international currency, and the issuer and the debt must
have a credit rating of BBB or above ranked by an internationally-recognised rating agency. In
accordance with the relevant regulation, if an exemption from the above requirement as to credit
ratings applies, the issuer shall have not less than the credit rating required in respect of the bond.
Bonds issued by the PRC Government outside of China’s territory are not subject to the requirements
as to credit rating referred to above. The convertible bonds should be listed on an exchange in a
prescribed country or region listed in the regulation.

(3) Equity products

Equity products include ordinary/preference shares and global/American depository receipts and
equities of unlisted companies in certain industries.

The stocks and depository receipts must be listed on the main board of a stock exchange in a
country or region listed in the Detailed Rules for the Implementation of the Interim Measures for the
Administration of Overseas Investment with Insurance Funds (保險資金境外投資管理暫行辦法實施
細則).

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Direct invested equity of unlisted companies is limited to equity investments in corporates in


finance, pension, health care, energy, resources, car services and modern agriculture.

(4) Real estate products

Direct investment in real estate products are limited to commercial real estate located in the
central business districts of the major cities of the designated developed countries/regions listed in the
Detailed Rules for the Implementation of the Interim Measures for the Administration of Overseas
Investment with Insurance Funds (保險資金境外投資管理暫行辦法實施細則). The said commercial
real estate should be established commercial real estate and office real estate with stable income.

Insurance companies shall, pursuant to the Interim Measures for the Administration of Overseas
Investment with Insurance Funds (保險資金境外投資管理暫行辦法) and the Detailed Rules for the
Implementation of the Interim Measures for the Administration of Overseas Investment with Insurance
Funds (保險資金境外投資管理暫行辦法實施細則), report the status of overseas investment of
insurance fund to the CIRC.

Prohibitive Regulations

According to the Interim Management Measures on the Deployment of Insurance Funds


(保險資金運用管理暫行辦法), an insurance group (holding) company or an insurance company
engaged in the deployment of insurance funds shall not commit any of the following acts:

• depositing insurance funds in non-banking financial institutions;

• purchasing the shares under “special treatment” (ST) or “special treatment of delisting risk
warning” (*ST) imposed by stock exchanges;

• investing in enterprises’ equities or real estate that has no prospects for a stable cash return
or asset value gain, or those that involve high-polluting projects not in conformity with the
national industry policies;

• directly engaging in the development and construction of real estate;

• using the investment assets formed from the deployment of insurance funds to provide
guarantees or grant loans, with the exception of granting personal policy-pledged loans;

• engaging in venture capital investment;

• other investments prohibited by the CIRC.

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Ratios Oversight

The Circular on Strengthening and Improving Ratios Oversight for the Application of Insurance
Proceeds (關於加強和改進保險資金運用比例監管的通知) was promulgated and implemented on
January 23, 2014. According to its contents, “the Circular will take effect on the date of promulgation,
the original oversight ratios of insurance funds investment and the applicable investment ratios of
innovative pilot business will be revoked.” According to this provision, the provisions about the
oversight percentage of insurance funds invested in various investment products before dispersing will
no longer apply.

For the purpose of supervision on insurance funds, the investment assets of insurance companies
are classified into five categories, namely, liquid assets, fixed-income assets, equity assets, real estate
assets and other financial assets.

In terms of major asset class allocation for insurance companies, the following ratios should be
implemented:

• Book balance of the invested equity assets should, in total, be no more than 30% of the total
assets of the company at the end of the latest quarter, and book balance of the major equity
investment should be no more than the company’s net assets at the end of the latest quarter.
Book balance does not include equities of insurance companies that were invested with its
own funds.

• Book balance of the invested real estate assets should be no more than 30% of the total
assets of the company at the end of the latest quarter. Book balance does not include
self-use real estate purchased by the insurance company.

• Book balance of the self-use real estate purchased by the insurance company should be no
more than 50% of the net assets of the company at the end of the latest quarter.

• Book balance of other invested financial assets should be no more than 25% of the total
assets of the company at the end of the latest quarter.

• Balance of the overseas investment should be, in total, be no more than 15% of the total
assets of the company at the end of the latest quarter.

For setting cap on the insurance funds that insurance companies invest in a single asset and a
single counterparty, the following ratio should be implemented:

• Book balance of the invested single fixed-income assets, equity assets, real estate assets,
and the other financial assets, should be no more than 5% of the company’s total assets at
the end of the latest quarter. Excluding investments such as domestic central government
bonds, quasi government bonds, bank deposits, major equity investment and insurance
corporate equities invested by its own funds, purchase of real property for its own use, and
purchase of insurance asset management products within the group.

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A single asset investment refers to investing in a single specific asset product among a major
asset class. For an investment product that is issued in instalments, book balance of the single asset
investment is the total investment balances of each instalment.

• Balance of the investment in a single legal entity, in total, should be no more than 20% of
the total assets of the company at the end of the latest quarter. Excluding investments such
as domestic central government bonds, quasi government bonds, and insurance corporate
equity invested by its own funds.

A single legal entity refers to a single financing body that insurance companies invest in and
forms a direct contractual relationship or direct equity relationship with, which possesses independent
legal personality.

Pursuant to the Circular on Oversight of the Percentages (比例監管通知), insurance companies


should add up the oversight percentages of the largest assets both inside and outside of China.

Anti-Money Laundering

According to the Rules for Anti-money Laundering by Financial Institutions


(金融機構反洗錢規定) implemented on January 1, 2007, PBOC is the major administrative department
under the State Council responsible for anti-money laundering. The PBOC monitors and governs the
anti-money laundering works of financial institutions according to the laws. The CBRC, the CSRC and
the CIRC perform their duties in monitoring and governing anti-money laundering works in their
respective fields.

According to the PRC Anti-Money Laundering Law (中華人民共和國反洗錢法) and Rules for
Anti-money Laundering by Financial Institutions (金融機構反洗錢規定) implemented on January 1,
2007, the Administrative Measures for the Financial Institutions’ Report of Large-sum Transactions
and Doubtful Transactions (金融機構大額交易和可疑交易報告管理辦法) implemented on March 1,
2007 (hereinafter referred to as the Administrative Measures for the Financial Institutions’ Report of
Large-sum Transactions and Doubtful Transactions (2016 Amendment) (金融機構大額交易和可疑交
易報告管理辦法(2016修訂)) will be implemented since July 1, 2017, the Administrative Measures for
Financial Institutions’ Report of Transactions Suspected of Financing for Terrorist Purposes
(金融機構報告涉嫌恐怖融資的可疑交易管理辦法) implemented on June 11, 2007, and the Measures
for the Supervision and Administration of Anti-Money Laundering by Financial Institutions (Pilot)
(金融機構反洗錢監督管理辦法(試行)) implemented on November 15, 2014, serving as financial
institutions, insurance companies should establish and implement internal anti-money laundering
control systems, set up specialised departments or appoint internal departments to conduct anti-money
laundering work, lay out internal anti-money laundering operation procedures and control measures,
and offer anti-money laundering trainings to staff members, so as to strengthen their anti-money
laundering capabilities and to comply with relevant regulations. Insurance companies should establish
and implement customer identification systems in accordance with relevant regulations, and report to
their headquarters any transactions suspected of terrorist financing. Then the headquarters, or any
organisations appointed by the headquarters, can report to the China Anti-Money Laundering
Monitoring & Analysis Centre (中國反洗錢監測分析中心) electronically within ten business days
after the relevant incident occurred.

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REGULATORY OVERVIEW

According to the Notice of China Insurance Regulatory Commission on Strengthening the


Anti-money Laundering Work in the Insurance Sector (中國保險監督管理委員會關於加強保險業反洗
錢工作的通知) implemented on August 10, 2010 and Measures on Anti-Money Laundering in the
Insurance Industry (保險業反洗錢工作管理辦法) implemented on October 1, 2011, the CIRC is
responsible for organising, coordinating and guiding anti-money laundering works in the insurance
industry. Insurance companies, insurance asset management companies, insurance agencies, and
insurance brokerage companies should base their insurance policy registrations on real names and
follow the principles of complete customer data, proper documentation of trading records and capital
flows regulations, thereby tightening the internal controls on anti-money laundering.

Applications for the establishment of insurance companies and insurance asset management
companies should meet the anti-money laundering conditions set forth by the CIRC (including
legitimate sources of investment asset; establishment of internal anti-money laundering systems;
setting up specialised bodies or appointing internal departments to conduct anti-money laundering
works; appointing anti-money laundering bodies or individuals who had received the necessary
anti-money laundering trainings; equipped with information systems that meet the needs of
anti-money laundering works; and other requirements as set forth by the CIRC). If there are additions
to the registered capital, changes in shareholdings (except when the shares of listed institutions
acquired through securities exchanges are less than 5% of the registered capital of the insurance
company or insurance asset management company), or other circumstances as stipulated by the CIRC,
insurance companies or insurance asset management companies should have knowledge about the
sources of the investment asset. They should also file explanations regarding the sources of investment
asset, and declare the legitimacy of such sources.

Applications for the establishment of affiliates of insurance companies or insurance asset


management companies should meet the anti-money laundering conditions set forth by the CIRC
(including the following: the parent company possesses a robust anti-money laundering internal
control system, and has sound governance over the affiliate; the information system of the parent
company is able to support the anti-money laundering works of the affiliate; setting up specialized
bodies or appointing internal departments to conduct anti-money laundering works in the affiliate,
which is being set up; the anti-money laundering personnel has received the necessary anti-money
laundering trainings; and other requirements set forth by the CIRC).

In pursuance to the laws, when entering into insurance contracts, rescinding insurance contracts,
settling claims or making payments, insurance companies should perform customer identification on
any transactions with amounts above the specified level;

• In pursuance to the laws, insurance companies and insurance asset management companies
should properly maintain customers’ personal data and trading records, and ensure related
transaction information can be retraced, which enables the monitoring and analysis of
transactions, investigation of suspicious transaction, and the tracing of required
information for anti-money laundering criminal cases;

• Insurance companies and insurance asset management companies should, according to the
laws, identify and report large-sum transactions and suspicious transactions;

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• When conducting insurance businesses through insurance agencies and financial


institutions who act as ancillary insurance agencies, insurance companies should include
anti-money laundering terms and conditions in the cooperation agreements.

According to the regulations set forth in the Notice of China Insurance Regulatory Commission
on Strengthening the Anti-money Laundering Work in the Insurance Sector (中國保險監督管理委員
會關於加強保險業反洗錢工作的通知), in the application materials seeking approval for the
qualifications of senior management of insurance institutions, there should be a declaration stating
that the applicant has not been a subject of any material anti-money laundering administrative
sanctions in the past two years; for those applicants who have previously worked in foreign financial
institutions, a declaration should be submitted stating that in the past two years, the applicant has not
been a subject of any material anti-money laundering administrative sanctions in the jurisdiction
where the foreign financial institution resides. All insurance companies and insurance intermediary
institutions should regularly collect, summarise, report information and closely monitor the progress
of the agency’s anti-money laundering works, guard against the risk of money laundering, and conduct
anti-money laundering trainings and promotions, so as to raise the awareness and strengthen
preventive measures with regard to anti-money laundering.

According to the Notice on Reporting Information of Anti-money Laundering Work in the


Insurance Industry (關於報送保險業反洗錢工作信息的通知) implemented on October 1, 2011, all
insurance companies and insurance asset management companies should summarise the progress of
anti-money laundering works in the system, and report information about such progress to the CIRC
quarterly. According to the laws and regulations of the PRC Anti-Money Laundering Law
(中華人民共和國反洗錢法), information about anti-money laundering works refers to, in the operation
and supervision of insurance businesses, the situation of anti-money laundering works carried out in
accordance with the laws, including: The implementation status of anti-money laundering obligations,
the execution of anti-money laundering works in the organisation, and the supervision of anti-money
laundering works in the insurance industry.

MAJOR INSURANCE INDUSTRY COMMITMENTS IN CONNECTION WITH THE PRC’S


ACCESS TO THE WORLD TRADE ORGANIZATION (“WTO”)

According to the Circular on Distributing the Contents Related to Insurance Industry in the Legal
Documents of China’s Accession to WTO (關於印發我國加入WTO法律文件有關保險業內容的通知)
announced on March 12, 2002, the following are the parts related to the insurance industry in the legal
documents about China’s entrance into the WTO, Foreign Ownership, Territorial Restrictions and
Business Scope.

Foreign Ownership

Since the PRC’s accession to the WTO, foreign property and casualty insurance companies have
been permitted to establish branches or joint ventures and are permitted to establish wholly-owned
subsidiaries in the PRC. Foreign life and health insurance companies have been permitted to have up
to 50% foreign ownership in a joint venture with a partner of their choice and also may freely agree
on the terms of the joint venture, provided that the terms remain within the limits of the commitments
contained in the WTO schedule. Currently, foreign investors are permitted to hold up to 51% of

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REGULATORY OVERVIEW

ownership in a joint venture insurance brokerage company. In addition, pursuant to the Announcement
on Permitting Foreign Insurance Brokerage Companies to Establish Wholly Foreign-owned Insurance
Brokerage Companies (關於允許外國保險經紀公司設立外商獨資保險經紀公司的公告) promulgated
by the CIRC on December 11, 2006, from December 11, 2006, foreign insurance brokerage companies
are allowed to establish wholly foreign-owned insurance brokerage companies according to law
without any restriction other than those on conditions for establishment and business scope.

Territorial Restrictions

Foreign insurance companies are permitted to conduct business throughout the PRC without any
territorial restrictions.

Scope of Business

Since the PRC’s accession to the WTO, foreign property and casualty insurance companies have
been permitted to provide without territorial restrictions master policy insurance (a single insurance
policy for a company covering its various properties or liabilities located in different geographic
regions) and large-scale commercial insurance. Foreign property and casualty insurance companies are
now permitted by the CIRC to provide the full range of property insurance services to both foreign
and PRC clients.

At present, life and health joint venture insurers in the PRC are also permitted by the CIRC to
provide health insurance, group insurance and pension/annuities services to foreign and PRC citizens.

Currently, foreign insurance brokerage companies are permitted to engage in the following
brokerage business in the PRC: (i) Large-scale commercial insurance brokerage; (ii) Reinsurance
brokerage; and (iii) International maritime, aviation and transport insurance and their reinsurance
brokerage. In addition, foreign insurance brokerage companies are permitted to provide master policy
insurance brokerage business on the same basis as treatment of nationals.

Foreign insurance companies are permitted to provide reinsurance services for life and health
insurance and property insurance as a branch, joint venture, or wholly foreign-owned subsidiary,
without geographic or quantitative restrictions on the licenses issued.

Foreign insurance companies are not permitted to engage in statutory insurance business.
Statutory insurance, as specified in China’s Schedule of Specific Commitments, is limited to the
following specific categories, and no additional lines or products will be added: third party auto
liability insurance and driver and operator liability insurance for buses and other commercial vehicles.
Nevertheless, pursuant to the Regulation on Statutory Automobile Liability Insurance
(機動車交通事故強制保險條例) amended on December 17, 2012 and February 6, 2016, insurers may,
upon the approval of the CIRC, conduct statutory automobile liability insurance business. In addition,
foreign insurance companies and foreign-funded insurance companies are not permitted to engage in
businesses forbidden by laws, administrative regulations and other regulatory documents of the PRC.

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Foreign-Invested Insurance Companies

Under the Administrative Regulations of the PRC on Foreign-Invested Insurance Companies


(外資保險公司管理條例) amended on May 30, 2013, a foreign-invested insurance company means (i)
an insurance company established in the PRC as joint venture by a foreign insurance company with
a PRC company or enterprise (“Joint Venture Insurance Company”); (ii) an insurance company inside
the PRC invested and operated by a foreign insurance company (“Wholly Foreign-Owned Insurance
Company”); or (iii) a branch of a foreign insurance company inside the PRC (“Branch of Foreign
Insurance Company”). Foreign insurance companies applying for the establishment of a
foreign-invested insurance company shall satisfy the following requirements:

(i) having been engaged in the insurance business for at least 30 years;

(ii) having a representative office in the PRC for at least 2 years;

(iii) having total assets of US$5 billion or more as at the end of the year immediately prior to
its application;

(iv) being subject to effective insurance regulation by the relevant authorities in their home
countries or regions which possess a comprehensive insurance regulatory system;

(v) meeting the solvency margin requirements in their home countries or regions;

(vi) having received approvals from the regulatory authorities in their home countries or regions
of their applications; and

(vii) other prudent requirements by the CIRC.

The minimum registered capital of a Joint Venture Insurance Company or Wholly


Foreign-Owned Insurance Company is RMB200 million or an equivalent amount in other freely
convertible currencies. The minimum registered capital must be paid-in monetary capital. A Branch
of Foreign Insurance Company must be able to obtain at least RMB200 million or an equivalent
amount in other freely convertible currencies at nil consideration from its parent company as its
working capital.

According to the business scope verified by the CIRC, a foreign-invested insurance company
may legally operate all or any of the following categories of insurance business: (i) Property insurance
business, including property loss insurance, liability insurance, credit insurance and other insurance
business; (ii) Life and health insurance business, including life insurance, health insurance, accident
insurance and other insurance business. Upon verification of the CIRC according to applicable
regulations, a foreign-invested insurance company may operate large-scale commercial insurance and
master policy insurance business within the verified scope; and (iii) The following reinsurance
business of insurance business specified in (i) and (ii) above: (1) outward reinsurance and (2) inward
reinsurance. The specific business scope, territorial coverage and clients of a foreign-invested
insurance company are subject to the verification of the CIRC according to applicable regulations. A
foreign-invested insurance company may conduct insurance business only within the verified scope.

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Internet Business

The State Council promulgated the Regulation on Telecommunications of the People’s Republic
of China (中華人民共和國電信條例) (hereinafter referred to as the “Regulation on
Telecommunications”) on September 25, 2000 and amended the same on July 29, 2014 and February
6, 2016 respectively. According to the Regulation on Telecommunications, telecommunications
business is divided into two categories: basic telecommunications business and value-added
telecommunications business. According to the Telecommunication Business Category
(電信業務分類目錄) attached to the Telecommunication Ordinance (電信條例) promulgated by the
Ministry of Information Industry of the People’s Republic of China (formerly the Ministry of Industry
and Information Technology) on February 21, 2003 and revised by the Ministry of Industry and
Information Technology of the People’s Republic of China on December 28, 2015, information
services provided through the fixed network, mobile network and the internet are categorized as
value-added telecommunications business.

The Regulation on Internet Information Service of the People’s Republic of China


(互聯網信息服務管理辦法)(hereinafter referred to as the “Regulation on Internet Information
Services”), which was promulgated on September 25, 2000 and revised on January 8, 2011 by the State
Council, has developed the guidelines relating to internet information services. The contents of
China’s internet information are highly regulated. According to the Regulation on Internet Information
Services, offenders shall be punished for the provision of the following internet information contents,
including criminal sanctions: opposing the basic principles of the PRC Constitutions, endangering
national security, divulging state secrets, subverting state power or damaging national unity, harming
the dignity or interests of China, inciting national hatred or racial discrimination, or damaging
international solidarity, undermining China’s religious policies or promoting superstition,
disseminating rumors, disrupting social order or undermining social stability, spreading obscenity or
pornography, encouraging gambling, violence, murder or intimidation, or instigating crimes, insulting
or defaming a third party or infringing the legitimate rights and interests of the third party, or other
contents prohibited by law or administrative regulations.

Internet contents are regulated and restricted in China from the standpoint of national security.
Pursuant to the Decision on Preserving Computer Network Security (維護互聯網安全的決定)
promulgated on December 28, 2000 and revised on August 27, 2009 by the Standing Committee of the
National People’s Congress (hereinafter referred to as the “NPC Standing Committee”), anyone who
commits any of the following acts within the PRC shall be investigated for criminal responsibility: (i)
invading the computer or system of strategic importance; (ii) disseminating harmful information; (iii)
divulging State secrets; (iv) disseminating false business information; or (v) infringing intellectual
property rights. According to the Measures for Administration of International Network Security of
Computer Information Network (計算機信息網絡國際聯網安全保護管理辦法) issued on December
16, 1997 and revised and implemented on January 8, 2011 by the Ministry of Public Security,
disclosure of state secrets or spreading contents that disturbs social order via the internet are
prohibited. The Ministry of Public Security has the power of supervision and inspection in this regard,
and the relevant local public security departments may also have the rights of supervision and review.
If a holder of business license of telecommunications and information services (ICP license) violates
these measures, the Chinese government may revoke its ICP license and close its website.

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On December 28, 2012, the NPC Standing Committee announced the implementation of the
Decision on Strengthening Protection of Network Information (關於加強網絡信息保護的決定) which
stipulates the basic principles for protection of identity of citizens and electronic information
involving personal privacy of citizens. On July 16, 2013, the Ministry of Industry and Information
Technology announced the Provisions on Protecting the Personal Information of Telecommunications
and Internet Users (電信和互聯網用户個人信息保護規定) to further improve the system for
protecting personal information of telecommunications and the internet industry, clarify the scope and
obligors of protecting personal information of telecommunications and internet users, the rules for
collection and use of users’ personal information by telecommunications business operators and
measures for management of agency and information security protection.

The NPC Standing Committee has promulgated the Cybersecurity Law of the People’s Republic
of China (中華人民共和國網絡安全法) (hereinafter referred to as the “Cybersecurity Law”). The
Cybersecurity Law was promulgated by the NPC Standing Committee on November 7, 2016 and took
effect on June 1, 2017. Pursuant to the Cybersecurity Law, network services providers who conduct
business and provide services shall comply with laws and regulations and to fulfill the obligation of
protecting cybersecurity, effectively respond to cybersecurity incidents, prevent illegal criminal
activities committed on the network, and maintain the integrity, confidentiality and availability of
network data.

Mobile Application

Mobile internet application (herein after referred to as the “Mobile Application”) is governed by
the Provisions on the Administration of Mobile Internet Applications Information Services (移動互聯
網應用程序信息服務管理規定) (hereinafter referred to as the “Provisions on Administration of
Application”) promulgated by the Cyberspace Administration of China on June 28, 2016 and became
effective on August 1, 2016.

Pursuant to the Provisions on Administration of Application, application information service


providers shall obtain the relevant qualifications prescribed by laws and regulations, strictly
implement their information security management responsibilities, and carry out the following duties:
(1) According to the principle of “real name enforced at backstage, and volunteered at front stage (後
台實名、前台自願)”, conduct mobile telephone number-based real identity information verification of
registered users; (2) Establish and complete user information security protection mechanisms, the
principles of legality, justice and necessity shall be respected when collecting and using personal
information, the objective, method and scope of collected and used data shall be clarified, and the user
shall consent; (3) Establish and complete information content inspection and management
mechanisms, where information content violating laws or regulations is published, in view of the
circumstances, punishments such as a warning, restriction of functions, provisional cessation of
renewal and account closure are implemented, records shall be preserved and reported to relevant
regulatory bodies; (4) Lawfully protect users’ right to know and right to choose in the process of
usage, and without clear indication to users and users’ consent, it is not permitted to initiate functions
such as collection of geographic location, accessing the address book, using the camera, starting

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recordings, etc., and it is not permitted to open functions unrelated to the service, or bundle or install
unrelated applications; (5) Respect and protect intellectual property rights, and it is prohibited to
produce or disseminate applications infringing other persons’ intellectual property rights; and (6)
Record users’ daily information, and preserve it for 60 days. Application store services providers shall,
within 30 days of the business going online and starting operations, conduct filing procedures with the
local cybersecurity and informatization department. Furthermore, internet application store service
providers and internet application information service providers shall sign service agreements to
determinate both sides’ rights and obligations.

REGULATIONS RELATING TO EMPLOYMENT AND SOCIAL WARFARE

The Labor Contract Law

The Labor Contract Law of the PRC (中華人民共和國勞動合同法) (hereinafter referred to as the
“Labor Contract Law”), which was implemented on January 1, 2008 and amended on December 28,
2012, is primarily aimed at regulating employee/employer rights and obligations, including matters
with respect to the establishment, performance and termination of labor contracts. Pursuant to the
Labor Contract Law, labor contracts shall be concluded in writing if labor relationships are to be or
have been established between enterprises or institutions and the laborers. Enterprises and institutions
are forbidden to force laborers to work overtime and employers shall pay laborers for overtime work
in accordance with national regulations. In addition, labor wages shall not be lower than local
standards on minimum wages and shall be paid to laborers timely. In addition, according to the Labor
Contract Law: (i) employers must pay laborers double wages if within one year an employer fails to
enter into an employment contract that is more than one month but less than one year from the date
of employment and if such period exceeds one year, the parties are deemed to have entered into a labor
contract with an “unfixed term”; (ii) employees who satisfy certain criteria, including having worked
for the same employer for ten years or more, may demand that the employer execute a labor contract
with them with an unfixed term; (iii) employees must adhere to terms in the labor contracts concerning
commercial confidentiality and non-competition; (iv) an upper limit not exceeding the cost of training
supplied to the employee can be as the amount of compensation an employer may seek for an
employee’s breach of the provisions concerning term of services in the labor contract; (v) employees
may terminate their employment contracts with their employers if their employers fail to make social
insurance contributions in accordance with the law; (vi) if an employer pays for an employee’s
professional training, the labor contract may specify a term of service. When the employee breach
term of service, the amount of compensation may not exceed the training expenses; (vii) employers
who demand money or property from employees as guarantee or otherwise may be subject to a fine
of more than RMB500 but less than RMB2,000 per employee; and (viii) employers who intentionally
deprive employees of any part of their salary must, in addition to their full salary, pay such employees
compensation ranging from 50% to 100% of the amount of salary so deprived if they fail to pay the
salary deprived within ascertain period by the labor administration authorities.

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REGULATORY OVERVIEW

According to the Labor Law of the PRC (中華人民共和國勞動法) promulgated on July 5, 1994,
effective since 1 January 1995 and amended on August 27, 2009, enterprises and institutions shall
establish and improve their system of workplace safety and sanitation, strictly abide by state rules and
standards on workplace safety, educate laborers in labor safety and sanitation in the PRC. Labor safety
and sanitation facilities shall comply with state-fixed standards. Enterprises and institutions shall
provide laborers with a safe workplace and sanitation conditions which are in compliance with state
stipulations and the relevant articles of labor protection.

Social Insurance and Housing Fund

As required under The Regulation of Insurance for Labor Injury (工傷保險條例) implemented on
January 1, 2004 and amended in 2010, The Provisional Measures for Maternity Insurance of
Employees of Corporations (企業職工生育保險試行辦法) implemented on January 1, 1995, The
Decisions of the State Council on the Establishment of a Unified Program for Old-Aged Pension
Insurance (國務院關於建立統一的企業職工養老保險制度的決定) issued on July 16, 1997, The
Decisions of the State Council on the Establishment of the Medical Insurance Program for Urban
Workers (國務院關於建立城鎮職工基本醫療保險制度的決定) promulgated on December 14, 1998,
The Unemployment Insurance Measures (失業保險條例) promulgated on January 22, 1999 and The
Social Insurance Law of the PRC (中華人民共和國社會保險法) implemented on July 1, 2011,
enterprises are obliged to provide their employees in the PRC with welfare schemes covering pension
insurance, unemployment insurance, maternity insurance, labor injury insurance and medical
insurance. These payments are made to local administrative authorities and any employer that fails to
contribute may be fined and ordered to make up within a prescribed time limit.

In accordance with The Regulations on the Management of Housing Funds


(住房公積金管理條例) which was promulgated by the State in 1999 and amended in 2002, enterprises
must register at the competent managing center for housing funds and upon the examination by such
managing center of housing funds, complete procedures for opening an account at the relevant bank
for the deposit of employees’ housing funds. Enterprises are also required to pay and deposit housing
funds on behalf of their employees in full and on time.

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HISTORY AND CORPORATE STRUCTURE

OVERVIEW

Our Company was incorporated on October 9, 2013 as a joint stock limited company under the
name of ZhongAn Online P & C Insurance Co., Ltd.* (眾安在綫財產保險股份有限公司) after
receiving approval from the CIRC. Our Company was founded by nine shareholders: Ant Financial (浙
江螞蟻小微金融服務集團股份有限公司) (previously known as Zhejiang Alibaba Digital Commerce
Company Limited (浙江阿里巴巴電子商務有限公司)), Tencent Computer System (深圳市騰訊計算機
系統有限公司), Ping An Insurance (中國平安保險(集團)股份有限公司), Shenzhen Jia De Xin
Investment Company Limited (深圳市加德信投資有限公司), Unifront Holding Limited (優孚控股有
限公司), Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司), Shanghai
Yuanqiang Investment Company Limited (上海遠強投資有限公司), Beijing Ctrip International Travel
Agency Limited (北京攜程國際旅行社有限公司) and Shenzhen Rixun Internet Co., Ltd. (深圳市日訊
互聯網有限公司). Our Company was the first internet company to obtain an insurance institution
permit (保險公司法人許可證) and one of the four online-only insurance companies holding such an
insurance permit. We offer a wide range of online insurance products and solutions to the Chinese
market.

We are registered with the Registrar of Companies in Hong Kong as a non-Hong Kong company
under Part 16 of the Companies Ordinance under “ZhongAn Online P & C Insurance Co., Ltd.” and
“眾安在綫財產保險股份有限公司”. We carry on business in Hong Kong as “ZA Online Fintech P &
C” as approved by and registered with the Registrar of Companies on September 6, 2017 and
September 13, 2017, respectively.

OUR MILESTONES

The following are the significant milestones of our development:

Date Event

2013 November We began operation.

2014 March CIRC approved the expansion of the insurance industry’s permitted
business scope, including the addition of “short term health and
accident insurance”.

April Our proprietary technology platform “Wujieshan” went online.

November The total number of insurance policies sold by us during the Double
11 Shopping Festival reached the record of approximately 100 million
within one week.

2015 May We received approval from CIRC to include “motor vehicle insurance,
including mandatory motor vehicle accident insurance and commercial
motor vehicle insurance” and “insurance information services” in our
permitted business scope.

June We completed our Pre-IPO Investments and RMB5.775 billion was


raised.
* For identification purposes only

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HISTORY AND CORPORATE STRUCTURE

September We received approval from CIRC to adopt the China Insurance


Association Model Comprehensive Commercial Vehicle Insurance
Policy (中國保險行業協會商業車險綜合示範條款) in six commercial
auto insurance experimental zones including Heilongjiang, Shandong,
Guangxi, Chongqing, Shanxi and Qingdao.

November We released the first Online to Offline auto insurance and maintenance
brand Baobiao Auto Insurance ( 保驫車險 ).

December We topped the “Fintech 100” list jointly published by KPMG and
Australian fintech investment firm H2 Ventures.

2016 April We released the Baobei Open Platform ( 保貝計劃 ), which connects
consumer finance platforms with our financial institution partners,
including banks, assets management department of securities brokers,
trusts, finance leasing companies, microfinance providers and
factoring companies by utilizing our advanced technology and risk
management capabilities.

May ZhongAn Information and Technology Services Co., Ltd. was


incorporated with the approval from CIRC.

August We released a mid-range medical insurance product Personal Clinic


Policy ( 尊享 e 生 ).

October We were placed fifth in the “Fintech 100” list jointly published by
KPMG and Australian fintech investment firm H2 Ventures.

November We released the “ZhongAn Tech” brand (眾安科技), with the aim of
supporting the technological upgrade of the insurance industry and
promoting and developing the insurance industry’s use of blockchain,
artificial intelligence and other new technologies.

The total number of insurance products sold by us during the Double


11 Shopping Festival reached the record of approximately 200 million
within one week.

The Joint Laboratory of Blockchain and Information Security (區塊鏈


與信息安全聯合實驗室) was established through our joint cooperation
with Fudan University.

December We were awarded the “Annual Award for Online Insurance” (年度互聯
網保險獎) at the 2016 Yicai Financial Summit (2016第一財經新金融
峰會).

As of December 31, 2016, we served over 492 million policyholders


and the insured since inception, and had an aggregate of 245 insurance
product terms approved by the CIRC.

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HISTORY AND CORPORATE STRUCTURE

INCORPORATION OF OUR COMPANY

On October 9, 2013, our Company was incorporated as a joint stock limited company with a
registered capital of RMB1 billion in the PRC. Upon its incorporation, our Company’s shareholding
was as follows:

Number of
Domestic Shares Ownership
of RMB1 each as percentage as of
Shareholder of October 9, 2013 October 9, 2013

Ant Financial 199,000,000 19.9000%


(浙江螞蟻小微金融服務集團股份有限公司) (1) . . ...........
Tencent Computer System 150,000,000 15.0000%
(深圳市騰訊計算機系統有限公司) (2) . . . . . . . . . . ...........
Ping An Insurance 150,000,000 15.0000%
(中國平安保險 (集團)股份有限公司) (3) . . . . . . . . ...........
Unifront Holding Limited 150,000,000 15.0000%
(優孚控股有限公司) (4) . . . . . . . . . . . . . . . . . . . . ...........
Shenzhen Jia De Xin Investment Company Limited 140,000,000 14.0000%
(深圳市加德信投資有限公司) (5) . . . . . . . . . . . . . ...........
Cnhooray Internet Technology Co. Ltd. 81,000,000 8.1000%
(深圳日訊網絡科技股份有限公司) (6) . . . . . . . . . . ...........
Shanghai Yuanqiang Investment Company Limited 50,000,000 5.0000%
(上海遠強投資有限公司) (7) . . . . . . . . . . . . . . . . . ...........
Beijing Ctrip International Travel Agency Limited 50,000,000 5.0000%
(北京攜程國際旅行社有限公司) (8) . . . . . . . . . . . . ...........
Shenzhen Rixun Internet Co., Ltd. 30,000,000 3.0000%
(深圳市日訊互聯網有限公司) (9) . . . . . . . . . . . . . ...........
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000,000 100.0000%

(1)
Ant Financial was previously known as Zhejiang Alibaba Digital Commerce Company Limited (浙江阿里巴巴電子商務
有限公司). Ant Financial leverages technology to assist financial institutions and its partners, with an aim of making
financial services accessible to small and micro enterprises and individual consumers. It is owned by Hangzhou Junao
Investments (Limited Partnership) (杭州君澳股權投資合夥企業(有限合夥)) as to 34.15%, Hangzhou Junhan
Investments (Limited Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) as to 42.28% and 21 other shareholders as
to the remaining 23.57%. The voting rights of Hangzhou Junao Investments (Limited Partnership)
(杭州君澳股權投資合夥企業(有限合夥)) and Hangzhou Junhan Investments (Limited Partnership)
(杭州君瀚股權投資合夥企業(有限合夥)) are controlled by Hangzhou Yunbo Investment Consulting Co., Ltd.
(杭州雲鉑投資諮詢有限公司) which in turn is wholly-owned by Jack Ma (馬雲).
(2)
Tencent Computer System is a subsidiary of Tencent Holdings Limited, a company listed on the Main Board of the Stock
Exchange (SEHK: 0700). It is a leading provider of internet value added services in China.
(3)
Ping An Insurance is a joint-stock company incorporated in the PRC and listed on the Main Board of the Stock Exchange
(SEHK: 02318) and the Shanghai Stock Exchange (SSE: 601318). It is a personal financial services group with three core
businesses: insurance, banking and investment.

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HISTORY AND CORPORATE STRUCTURE

(4)
Unifront Holding Limited (優孚控股有限公司) is owned by Shanghai Songlu Investment Management Co., Ltd. (上海松
鹿投資管理有限公司) as to 25%, Shanghai Jianglu Investment Management Co., Ltd. (上海江鹿投資管理有限公司) as
to 16.88%, Shanghai Xinlu Investment Management Co., Ltd. (上海鑫鹿投資管理有限公司) as to 13.12%. The entire
interest of Shanghai Songlu Investment Management Co., Ltd. (上海松鹿投資管理有限公司), Shanghai Jianglu
Investment Management Co., Ltd. (上海江鹿投資管理有限公司) and Shanghai Xinlu Investment Management Co., Ltd.
(上海鑫鹿投資管理有限公司) are held by Shanghai Youlu Investment Management Co., Ltd. (上海游鹿投資管理有限公
司), which in turn is controlled by Zhang Zhen (張真). It is principally engaged in investment, non-financial asset
management, trading, distributing products and technology in China.
(5)
Shenzhen Jia De Xin Investment Limited (深圳市加德信投資有限公司) is a subsidiary of Shenzhen Huaxinlian
Investment Co., Ltd. (深圳市華信聯投資有限公司) which is controlled by Ou Yafei (歐亞非). It is principally engaged
in investments in the financial industry and asset management. Ou Yafei is the elder brother of Ou Yaping, the Chairman
of our Board.
(6)
Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) is a subsidiary of Timeway Holdings Limited
(中宇集團有限公司). The entire interest of Timeway Holdings Limited (中宇集團有限公司) is held by Sinolink
Worldwide Holdings Limited (香港百仕達控股有限公司) which is listed on the Main Board of the Stock Exchange
(SEHK: 1168). It is principally engaged in the design, development and integration of network technology, computer
software and hardware and multimedia communication.
(7)
Shanghai Yuanqiang Investment Company Limited(上海遠強投資有限公司)is controlled by Zou Song (鄒松). It is
principally engaged in asset management.
(8)
Beijing Ctrip International Travel Agency Limited(北京攜程國際旅行社有限公司)is a subsidiary of Ctrip.com
International Ltd., a NASDAQ-listed company (NASDAQ: CTRP). It is a leading provider of travel services including
accommodation reservation, transportation ticketing, packaged tours and corporate travel management.
(9)
Shenzhen Rixun Internet Co., Ltd. (深圳市日訊互聯網有限公司)is wholly-owned by Shanglian Xinfutong
Communication Services Co., Ltd. (商聯信付通通訊服務有限公司), which is owned by Zhou Yi (周屹) as to 50% and
He Zhixiong (何志雄) as to 50%. It is principally engaged in the development and application of electronic
communication and software in addition to the internet telecommunications industry.

PRE-IPO INVESTMENTS

1. Overview

The Company completed its series A capital raising with the Pre-IPO Investors on June 7, 2015.
The Pre-IPO Investors paid in RMB5,775,000,000 for the subscription of an aggregate of 240,625,000
Foreign Shares at a price of RMB24 per Share. The allotment of Foreign Shares under the Pre-IPO
Investments was completed on June 7, 2015. After the allotment, our registered capital increased from
RMB1,000,000,000 to RMB1,240,625,000. The below table is a summary of the number of shares held

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HISTORY AND CORPORATE STRUCTURE

by the Pre-IPO Investors before and after completion of the Pre-IPO Investments, the consideration
paid and percentage of shareholding immediately prior to and after Listing:

Ownership
percentage as
Number of of the Listing
Shares before Number of Ownership Date (assuming
completion of Foreign Shares percentage as Over-allotment
Pre-IPO as of the date of Consideration of the date of Option is not
Shareholders Investments this prospectus paid (RMB) this prospectus exercised)

Morgan Stanley Asia — 30,730,833 737,539,992 2.4770% 2.1342%


Securities Products
LLC . . . . . . . . . . . . . ..
CICC Securities (HK)
Limited . . . . . . . . . . . .. — 31,250,000 750,000,000 2.5189% 2.1703%
CDH Avatar, L.P. . . . . . .. — 62,000,000 1,488,000,000 4.9975% 4.3058%
Keywise ZA Investment .. — 61,189,167 1,468,540,008 4.9321% 4.2495%
Equine Forces Limited
Partnership . . . . . . . . .. — 55,455,000 1,330,920,000 4.4699% 3.8513%
Total . . . . . . . . . . . . . . .. — 240,625,000 5,775,000,000 19.3954% 16.7110%

2. Principal terms of the Pre-IPO Investments and Pre-IPO Investors’ Rights

Type of investments Subscription of shares

Consideration per Share RMB24 per share

Discount to IPO price (based on 49.4%


the mid-point Offer Price of
HK$56.70)

Lock-Up Period The terms of the agreement under the Pre-IPO Investments
did not impose any lock up obligations over the Foreign
Shares held by any of the Pre-IPO Investors upon Listing.
However, pursuant to the PRC Company Law, the Pre-IPO
Investors will not be able to transfer the Shares issued to them
within one year from the Listing Date.

Use of Proceeds from the We used the proceeds for strengthening our capital base to
Pre-IPO Investments support our business growth. As of the Latest Practicable
Date, the net proceeds from the Pre-IPO Investments have
been fully utilized.

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HISTORY AND CORPORATE STRUCTURE

Strategic benefits the Pre-IPO At the time of the Pre-IPO Investments, our Directors were of
Investors brought to our the view that our Company could benefit from the additional
Company capital that would be provided by the Pre-IPO Investors’
investments in our Company and their knowledge and
experience.

Basis of determining the The basis of determination for the consideration for the
consideration paid Pre-IPO Investments were from arm’s length negotiations
between our Company and the Pre-IPO Investors after taking
into consideration the timing of the investments and the status
of our business and operating entities.

There are no special rights granted to the Pre-IPO Investors.

3. Public Float

Upon completion of the Global Offering (assuming the Over-allotment Option is not exercised),
the Pre-IPO Investors will collectively hold 240,625,000 H Shares or 16.71% of the Company and no
individual Pre-IPO Investor will hold 10% or more of the enlarged issue share capital of the Company.
As a result, the Shares held by the Pre-IPO Investors, excluding Keywise ZA Investment, will count
towards the public float. All the Pre-IPO Investors, excluding Keywise ZA Investment, are
Independent Third Parties of our Group.

4. Information about the Pre-IPO Investors

Morgan Stanley Asia Securities Products LLC

Morgan Stanley Asia Securities Products LLC (“MSASPL”) is incorporated in the Cayman
Islands. MSASPL conducts sales and trading activities as well as corporate lending in addition to also
being a holding company of a number of important wholly owned Asian subsidiaries of Morgan
Stanley. MSASPL is a wholly-owned subsidiary of Morgan Stanley, whose shares are listed on New
York Stock Exchange (NYSE: MS).

CICC Securities (HK) Limited

CICC Securities (HK) Limited, a company wholly-owned by China International Capital


Corporation Limited (SEHK: 3908), is an investment holding company registered in Hong Kong.

CDH Avatar, L.P.

CDH Avatar, L.P. is a private equity fund registered in Cayman Islands. It is advised and
managed by CDH China HF Holdings Company Limited as a general partner, which is wholly owned
by CDH Wealth Management Company Limited.

— 179 —
HISTORY AND CORPORATE STRUCTURE

Keywise ZA Investment

Keywise ZA Investment is an investment of Keywise Greater China Opportunities Master Fund


(the “Fund”). The investment advisor of the Fund is Keywise Capital Management (HK) Limited. The
Fund’s interest in Keywise ZA Investment is 23% and other investors’ interest is 77%. Keywise ZA
Investment is accustomed to taking instructions from Mr. Fang Zheng, a non-executive Director.

Equine Forces Limited Partnership

Equine Forces Limited Partnership was established on March 19, 2015 as an exempted limited
partnership under the laws of the Cayman Islands and is advised and managed by Equine Forces
Limited (Cayman Islands) as a general partner.

COMPLIANCE WITH INTERIM GUIDANCE AND GUIDANCE LETTERS

The Joint Sponsors confirm that the investment by the Pre-IPO Investors is in compliance with
the Guidance Letter HKEx-GL29-12 issued on January 2012 and updated in March 2017, the Guidance
Letter HKEx-GL43-12 issued by the Stock Exchange in October 2012 and updated in March 2017 and
the Guidance Letter HKEx-GL44-12 issued by the Stock Exchange in October 2012 and updated in
March 2017.

To the extent that there have been minor changes to the shareholding structure not disclosed in
this prospectus, the Company does not believe any of them to be significant for the purposes of
disclosure in accordance with applicable Hong Kong Stock Exchange guidance.

OUR MAJOR SUBSIDIARY AND OTHER OPERATING ENTITY

On July 7, 2016, we established ZhongAn Information and Technology Services Company


Limited (眾安信息技術服務有限公司). It was established to explore technology innovation focusing
in particular on artificial intelligence, block chain, cloud computing and data driven marketing. On
March 20, 2017, we established its Shanghai branch: ZhongAn Information and Technology Services
Co., Ltd. (Shanghai Branch) (眾安信息技術服務有限公司上海分公司).

Registered Percentage of Date of


Name of subsidiary Share Capital ownership incorporation

ZhongAn Information and Technology Services


Co., Ltd. (眾安信息技術服務有限公司) . . . . . . . RMB500,000,000 100% July 7, 2016

PLAN IN ESTABLISHING A SMALL LOAN COMPANY

Our Board has passed a resolution to establish a small loan company as a joint venture with
Sinolink Worldwide.

— 180 —
HISTORY AND CORPORATE STRUCTURE

Chongqing Finance Office (重慶市金融工作辦公室) and Chongqing Dazu Finance Office (重慶
市大足區金融工作辦公室) approved our proposal to establish a small loan company at Dazu District,
Chongqing (重慶市大足區) known as Chongqing ZhongAn Small Loan Company Limited (重慶眾安
小額貸款有限公司) as a joint venture with Sinolink Worldwide with a registered capital of RMB300
million in which we are expected to hold a 70% interest and Sinolink Worldwide is expected to hold
a 30% interest. We have not entered into any definitive agreement with Sinolink Worldwide as at the
Latest Practicable Date. As Sinolink Worldwide is an associate of Mr. Yaping Ou, Chairman of the
Board and our executive Director, we will, comply with the disclosure requirements under the Listing
Rules when the joint venture is established.

OUR STRUCTURE IMMEDIATELY PRIOR TO THE GLOBAL OFFERING

The chart below illustrates the structure of our Group immediately prior to the completion of the
Global Offering:

Shanghai Shanghai
Cnhooray Qingdao Shanghai Haoguan Qianguo
Shenzhen Huilijun Shenzhen
Ant Tencent Unifront Internet Yuanqiang Investment Investment Pre-IPO
Ping An Jia De Xin Rixun
Computer Holding Technology Trading Investment Management Management Investors
Financial(1) Insurance (3) Investment Internet
System (2) Limited (5)
Co., Ltd(6) Company Company Partnership Partnership (10)
Limited (4) Co., Ltd.
Limited(7) Limited (Limited (Limited
Partnership) (8) Partnership)(9)

16.04% 12.09% 12.09% 11.28% 7.25% 6.53% 4.03% 4.03% 2.42% 2.30% 2.53% 19.40%

ZhongAn Online P&C Insurance Co., Ltd.

100%
ZhongAn Information and Technology Services Co.,
Ltd.
ZhongAn Information and
Technology Services
(Shanghai Branch)

100% 100% 60% 60%

ZhongAn (Shenzhen) Life Hangzhou Qihui Internet Shanghai Yuanbao Internet Beijing Youwozai
Sciences Co., Ltd. Technology Co., Ltd. Technology Co., Ltd.(11) Technology Co., Ltd.(12)

(1) Ant Financial is owned by Hangzhou Junao Investments (Limited Partnership) (杭州君澳股權投資合夥企業(有限合夥))
as to 34.15%, Hangzhou Junhan Investments (Limited Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) as to
42.28% and 21 other shareholders as to the remaining 23.57%. The voting rights of Hangzhou Junao Investments
(Limited Partnership) (杭州君澳股權投資合夥企業(有限合夥)) and Hangzhou Junhan Investments (Limited
Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) are controlled by Hangzhou Yunbo Investment Consulting Co.,
Ltd. (杭州雲鉑投資諮詢有限公司) which in turn is wholly-owned by Jack Ma (馬雲).

(2) Tencent Computer System is a consolidated affiliated entity (through contractual arrangements) of Tencent Holdings
Limited, a company listed on the Main Board of the Stock Exchange (SEHK: 0700), and is one of its principal PRC
domestic operating entities. Tencent Computer System is a leading provider of internet value added services in China and
is a clear holder of our Shares. As such, Tencent Holdings Limited will be deemed to be interested in the Shares held
by Tencent Computer System upon Listing. Ma Huateng (馬化騰) holds 54.29% shares in Tencent Computer System.

— 181 —
HISTORY AND CORPORATE STRUCTURE

(3) Ping An Insurance is listed on the Main Board of the Stock Exchange (SEHK: 02318) and the Shanghai Stock Exchange
(SSE: 601318).

(4) Shenzhen Jia De Xin Investment Limited (深圳市加德信投資有限公司) is a subsidiary of Shenzhen Huaxinlian
Investment Co., Ltd. (深圳市華信聯投資有限公司) which is controlled by Ou Yafei (歐亞非). Ou Yafei is the elder
brother of Yaping Ou, the Chairman of our Board.

(5) Unifront Holding Limited (優孚控股有限公司) is owned by Shanghai Songlu Investment Management Co., Ltd. (上海松
鹿投資管理有限公司) as to 25%, Shanghai Jianglu Investment Management Co., Ltd. (上海江鹿投資管理有限公司) as
to 16.88%, Shanghai Xinlu Investment Management Co., Ltd. (上海鑫鹿投資管理有限公司) as to 13.12%. The entire
interest of Shanghai Songlu Investment Management Co., Ltd. (上海松鹿投資管理有限公司), Shanghai Jianglu
Investment Management Co., Ltd. (上海江鹿投資管理有限公司) and Shanghai Xinlu Investment Management Co., Ltd.
(上海鑫鹿投資管理有限公司) are held by Shanghai Youlu Investment Management Co., Ltd. (上海游鹿投資管理有限公
司), which in turn is controlled by Zhang Zhen (張真).

(6) Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) is a subsidiary of Timeway Holdings Limited
(中宇集團有限公司). The entire interest of Timeway Holdings Limited (中宇集團有限公司) is held by Sinolink
Worldwide Holdings Limited (香港百仕達控股有限公司) which is listed on the Hong Kong Stock Exchange (SEHK:
1168), of which Mr. Yaping Ou is interested in more than one third of the voting shares. As such, Timeway Holdings
Limited (中宇集團有限公司), Sinolink Worldwide Holdings Limited (香港百仕達控股有限公司) and Mr. Yaping Ou will
be deemed to be interested in the Shares held by Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限
公司) upon listing.

(7) Qingdao Huilijun Trading Company Limited (青島惠麗君貿易有限公司) acquired shares from Beijing Ctrip International
Travel Agency Limited(北京攜程國際旅行社有限公司)in a private transfer completed on April 28, 2017. The
transaction between the parties was a private, confidential transaction. Ctrip, though a U.S. listed company, was not
required to publicly disclose the amount of the proceeds it gained from the sale of its stake in the Company at the time
of completion, and therefore considers such information to remain confidential. As such, Ctrip has declined to provide
this information for disclosure in this document.

(8) Shanghai Haoguan Investment Management Partnership (Limited Partnership) (上海灝觀投資管理合夥企業(有限合夥))


acquired 28,570,000 shares from Unifront Holding Limited (優孚控股有限公司) which was completed on July 28, 2016.
Please also refer to Note 9 below.

(9) Shanghai Qianguo Investment Management Partnership (Limited Partnership) (上海謙果投資管理合夥企業(有限合夥))


acquired 31,430,000 shares from Unifront Holding Limited (優孚控股有限公司) through a private transfer which was
completed on July 28, 2016.

The purpose for the above transfer of a combined 60,000,000 Shares or 4.836% of the Company’s Shares from Unifront
Holding Limited (優孚控股有限公司) to Shanghai Haoguan Investment Management Partnership (Limited Partnership)
(上海灝觀投資管理合夥企業(有限合夥)) and Shanghai Qianguo Investment Management Partnership (Limited
Partnership) (上海謙果投資管理合夥企業(有限合夥)), completed on July 28, 2016, was for the motivation of our senior
management, core employees and other skilled personnel and to provide incentives for their contributions to our
Company. As of the Latest Practicable Date, the interests of Shanghai Haoguan Investment Management Partnership
(Limited Partnership) (上海灝觀投資管理合夥企業(有限合夥)) and Shanghai Qianguo Investment Management
Partnership (Limited Partnership) (上海謙果投資管理合夥企業(有限合夥)) were held by a general partner and 98
individuals, consisting of one Director and seven members of senior management (Jin Chen, Xing Jiang, Wei Xu, Ti Wu,
Hui Teng, Yongbo Zhang, Huichuan Zhou and Min Wang), and the remaining were employees of the Group. The
aggregate consideration of the transfer of the 60,000,000 Shares was RMB90,000,000, or RMB1.5 per Share, paid with
contributions from the said 98 employees of the Company to Shanghai Haoguan Investment Management Partnership
(Limited Partnership) and Shanghai Qianguo Investment Management Partnership (Limited Partnership).

(10) The remaining interest is owned by the Pre-IPO Investors. Please see “— Pre-IPO Investments” in this section for details.

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HISTORY AND CORPORATE STRUCTURE

(11) Shanghai Yuanbao Internet Technology Co., Ltd (上海員寶網絡技術有限公司) is owned by ZhongAn Information and
Technology Services Co., Ltd. (眾安信息技術服務有限公司), a wholly-owned subsidiary of our Company, as to 60%, and
Wu Qianchang (吳前常) as to 40%. Wu Qianchang is an Independent Third Party.

(12) Beijing Youwozai Technology Co., Ltd. (北京有我在科技有限公司) is owned by ZhongAn Information and Technology
Services Co., Ltd. (眾安信息技術服務有限公司), a wholly-owned subsidiary of our Company, as to 60%, Xu Wei (許煒)
as to 20% and Wang Dong (王東) as to 20%. Other than Xu Wei being the chief operating officer of our Company and
the shareholder of Beijing Youwozai Technology Co., Ltd., he is an Independent Third Party. Wang Dong is an
Independent Third Party.

OUR STRUCTURE IMMEDIATELY FOLLOWING THE GLOBAL OFFERING

The chart below illustrates the structure of our Group immediately following the completion of
the Global Offering (assuming that the Over-allotment Option is not exercised):

Shanghai Shanghai
Qingdao Shanghai Haoguan Qianguo
Shenzhen Cnhooray Huilijun Yuanqiang Shenzhen Investment Investment
Tencent Jia De Xin Unifront Internet
Ant Ping An Trading Investment Rixun Management Management Pre-IPO Public
Computer Investment Holding Technology
Financial(1) Insurance(3) Company Company Internet Partnership Partnership Investors(10) Shareholders
System(2) Limited(4) Limited(5) Co. Ltd.(6) Limited(7) Limited Co. Ltd. (Limited (Limited
Partnership)(8) Partnership)(9)

13.82% 10.42% 10.42% 9.72% 6.25% 5.63% 3.47% 3.47% 2.08% 1.98% 2.18% 16.71% 13.84%

ZhongAn Online P&C Insurance Co., Ltd.

100%
ZhongAn Information and Technology Services Co., Ltd.
ZhongAn Information and
Technology Services
(Shanghai Branch)

100% 100% 60% 60%

ZhongAn (Shenzhen) Life Hangzhou Qihui Internet Shanghai Yuanbao Internet Beijing Youwozai
Sciences Co., Ltd. Technology Co., Ltd. Technology Co., Ltd.(11) Technology Co., Ltd.(12)

Notes (1) to (12): Please refer to the details contained in Notes (1) to (12) in the preceding two pages.

— 183 —
BUSINESS

OVERVIEW

We are an online-only Insuretech company in China. Leveraging our technologies, we develop


ecosystem-oriented insurance products and solutions through scenario-based settings to better serve
our customers. From our inception in October 2013 to December 31, 2016, we sold over 7.2 billion
insurance policies and served approximately 492 million policyholders and the insured, ranking us the
largest insurer in China by these measures during this period according to the Oliver Wyman Report.
In addition, we are the largest online insurance company in China with GWP of RMB3,408.0 million
in 2016.

Our mission is to redefine insurance by connecting ecosystems and applying cutting-edge


technologies. We primarily offer products and solutions in the context of five major ecosystems:

• Lifestyle consumption ecosystem: We identify customers’ protection needs in both


e-commerce and electronic product related consumption scenarios. We provide insurance
products to cover risks associated with product quality, logistics and security of
transactions in collaboration with e-commerce platforms in China, such as Taobao
Marketplace and Weidian. We also partner with leading consumer electronics
manufacturers, such as Xiaomi, to provide insurance for accidental damage and repair
services for consumer electronic products such as cell phones and other smart devices.

• Consumer finance ecosystem: We offer insurance products and solutions, which protect
funding providers against default and facilitate consumer borrowing and consumption on
internet finance platforms, including Zhaocaibao and Xiaoying. We also serve the consumer
financing needs arising from other platforms, including China Telecom and Mogujie.

• Health ecosystem: We offer insurance products and solutions covering risks of customers
incurring healthcare expenses. We also provide value-added services to increase health
awareness for our customers. We offer individual health insurance products and group
health insurance plans. We partner with hospitals, medical device manufacturers such as
Omron, and online healthcare platforms such as We Doctor, online healthcare forums,
pharmaceutical companies and distributors.

• Auto ecosystem: We offer insurance products to protect our customers against vehicle
damage, personal injury and death, and vehicle theft and robbery. Since 2015, we jointly
launched Baobiao Auto Insurance with Ping An Insurance, our shareholder and an insurance
company in China. As of the Latest Practicable Date, we have obtained licenses to
underwrite auto insurance in 18 regions in China, which cover the majority of the auto
insurance market in China, as compared to six regions as of December 31, 2016.

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BUSINESS

• Travel ecosystem: We offer insurance products and solutions to our customers, covering
various risks arising from travel, such as travel accident, travel delay and travel
cancellation. Since 2015, we have partnered with Ctrip to offer our Flight Delay Policy. We
have since expanded to partner with major online travel agencies, airlines and offline travel
agencies.

We believe our proprietary infrastructure and technologies are critical to our success. We operate
our core insurance system on our proprietary cloud-based platform called Wujieshan. We have also
developed artificial intelligence capabilities to optimize product features quickly to enhance customer
experience and strengthen risk management. We have accumulated extensive user data originating
from our large and expanding customer base and third-party data providers. The application of our big
data analytics throughout the insurance value chain enhances our results of operations. In July 2016,
we established a wholly-owned subsidiary, ZhongAn Technology, which focuses on research and
development of financial technology solutions. We plan to export and monetize our technology
solutions in the future.

We have adopted a set of effective policies and procedures that is consistent with industry best
practice to evaluate and manage risks. We have an experienced team comprised of risk, legal and
compliance professionals to oversee our risk management efforts. In addition, our data-driven risk
management system enables dynamic pricing and risk tracking, which enables us to optimize our
products based on our risk control capabilities.

We experienced significant growth during the Track Record Period. Our GWP increased
significantly from RMB794.1 million in 2014 to RMB2,283.0 million in 2015, and further to
RMB3,408.0 million in 2016 and also increased from RMB604.4 million in the first quarter of 2016
to RMB1,030.4 million in the first quarter of 2017. Our net premiums earned increased significantly
from RMB712.2 million in 2014 to RMB1,921.5 million 2015, and further to RMB3,225.4 million in
2016 and also increased from RMB569.2 million in the first quarter of 2016 to RMB886.8 million in
the first quarter of 2017.

OUR STRENGTHS

The largest online-only insurance company in China’s fast-growing Insuretech market

We are an online-only Insuretech company in China. Leveraging our technologies, we design and
offer insurance products and solutions through scenario-based settings to better serve hundreds of
millions of customers. From our inception in October 2013 to December 31, 2016, we sold over 7.2
billion insurance policies and served approximately 492 million policyholders and the insured,
ranking us the largest insurer in China by these measures during this period according to the Oliver
Wyman Report. In addition, we are the largest online insurance company in China with GWP of
RMB3,408.0 million in 2016. As of March 31, 2017, we had sold over 8.2 billion insurance policies
and served approximately 543 million policyholders and the insured since our inception.

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China’s insurance industry is rapidly growing, in particular, China’s Insuretech industry is one
of the fastest-growing sectors with massive potential. According to the Oliver Wyman Report, the
GWP of China’s insurance market is expected to grow from approximately RMB3.1 trillion in 2016
to approximately RMB4.9 trillion in 2021, representing a CAGR of 9.6%, while China’s Insuretech
market is expected to grow from RMB363 billion in 2016 to RMB1,413 billion in 2021, representing
a CAGR of 31.2%. We have achieved significant growth since our inception in 2013. Our GWP
increased significantly from RMB794.1 million in 2014 to RMB2,283.0 million in 2015, and further
to RMB3,408.0 million in 2016 and also increased from RMB604.4 million in the first quarter of 2016
to RMB1,030.4 million in the first quarter of 2017. In particular, we had the largest market share of
44% in terms of GWP of online non-auto property and casualty insurance in China in 2015, according
to the Oliver Wyman Report.

We are a pioneer in China’s Insuretech market. Founded in October 2013, we are the first online
insurance company in China. We were the first to address and have a leading market position in the
ecosystem-oriented Insuretech market, which extends beyond traditional insurance market. We partner
with leading companies in different ecosystems in China to develop and offer innovative insurance
products and solutions to customers through scenario-based settings. We have established partnership
with a number of leading e-commerce platforms in China and all of the top four online travel agencies.
We believe that our technology, accumulated knowledge and experience in Insuretech market enable
us to strengthen our leading position, react to the fast-evolving market trends and differentiate us from
our competitors.

We believe our “ZhongAn” brand is one of the best known and the most trustworthy brands in
the industry. We are ranked among the top five fintech companies globally and the only Insuretech
company in China in the “Fintech 100 2016” report by KPMG & H2 Ventures, which shortlisted
companies that are using technologies to innovate and disrupt the traditional financial industry. We
believe our brand recognition enhances our relationship with our ecosystem partners as their preferred
insurance provider. Our brand awareness also increases customer loyalty. In 2016, approximately 78%
of our customers were served by our products at least twice, and on average, each of our customers
was protected by 10.3 policies during the year. Our average GWP per customer increased from
RMB4.0 in 2014 to RMB7.3 in 2015 and further to RMB9.9 in 2016 and increased from RMB3.8 in
the first quarter of 2016 to RMB4.3 in the first quarter of 2017. Since our inception till March 31,
2017, there were approximately 18.0 million customers served by our products from at least two
ecosystems. We believe our valuable brand image proves our first-mover advantage in China’s
Insuretech market and makes us stand out in the fast-growing and fragmented Insuretech market in
China. We believe we are well-positioned to capitalize on the enormous growth of the Insuretech
industry in China and continue to lead its development.

Innovative and scalable business model

The center of our innovative and scalable business model is the value we create for our customers
and ecosystem partners. For our customers, we strive to deliver the best insurance products and
solutions by addressing their protection needs and discovering the new needs arising from the internet
economy. For our ecosystem partners, we integrate our products into their platforms to enhance the
customer experience by providing insurance protection, which in turn encourages user engagement on
our ecosystem partners’ platforms.

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Value propositions to our customers

We design and offer insurance products and solutions to address the needs associated with
customers’ everyday lives. Our products are embedded in our partners’ online platforms in different
ecosystems, including lifestyle consumption, consumer finance, health, auto and travel ecosystems.
We offer policies in various levels of premiums with dynamic and customized pricing, which allows
us to accumulate a large customer base and address the needs that many traditional insurers may not
be able to meet. We believe we offer our customers the following value propositions:

• Personalized product offerings: Powered by our proprietary technologies and big data
analytics, we observe and react to the market trends in different ecosystems and design
innovative and personalized insurance products of different terms and protection scopes.
With our customer-centric approach, we believe that we are able to address the customers’
protection needs. As of March 31, 2017, we had 262 product terms approved by the CIRC,
based on which we developed thousands of insurance products and solutions in connection
with various scenarios.

• Customized and dynamic pricing: Our cloud-based computing and data analytical
capabilities enable us to profile our customers and achieve automated and customized
pricing for many of our insurance products. For example, our Shipping Return Policy is
integrated into our various e-commerce ecosystem partners’ platforms. Our customers are
provided with instant premium decisions while they are shopping online without taking any
additional actions or wait for lengthy approval process, which ensures a convenient
purchase experience.

• Automated services: We implement automated claims process and fraud detection


technologies which make real-time claim settlement feasible. For example, our Flight
Delay Policy is integrated into the platforms of the leading online travel agencies and major
Chinese airlines. Customers who purchased this product will be reimbursed automatically
into their WeChat Pay accounts if flights are delayed beyond certain amount of time as
specified in the policy. Our automated customer service system is able to address
customers’ inquiries and improve customer satisfaction. We also utilize our artificial
intelligence technology to automatically examine whether the conditions of the phone
screens meet the underwriting requirements of the Phone Screen Crack Policy.

Value propositions to our ecosystem partners

We create a virtuous cycle for our ecosystems. We embed our products into the platforms of our
ecosystem partners to address the customers’ needs for protection during the purchase process. We
also improve the customer experience by lowering the frequency of disputes caused by unsatisfactory
products and services. We believe that these policies help drive the overall increase in purchases and
consumption in the ecosystems as they improve customer experience and contribute to our partners’
growth. As such, we have established partnerships with leading Chinese internet companies, such as
Alibaba, Mogujie, Ctrip, Didi Chuxing, Xiaomi, Ant Financial, Bestpay, amongst others. As of
December 31, 2014, 2015 and 2016 and March 31, 2017, we had 20, 71, 177 and 199 ecosystem
partners, respectively.

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Furthermore, we are able to export our core competencies, such as technology capabilities and
consumer finance capabilities to our ecosystem partners. For example, we are able to connect funding
providers with platforms whose customers have consumer finance needs, provide our risk management
and evaluate customer credit profile. Also, we connect our open APIs with smaller and more
specialized ecosystem partners which do not have the business scale to establish proprietary
technology platforms.

A sustainable business model that thrives in the ecosystems and drives growths

We believe that our strong value propositions to the customers and our ecosystem partners
strengthen our leading position and create barriers of entry. We believe that our innovative business
model and strong technology capabilities lead to the evolution of the insurance value chain, including
product development, marketing and distribution, pricing and underwriting and claim settlement.
Through our scalable business model, we have reached a diversified customer base with relatively
lower sales and marketing expense. As of March 31, 2017, more than 60% of our customers who have
disclosed their age were aged 20 to 35 who are receptive to our innovative products and solutions and
accustomed to ecosystem partners. We have attracted a large customer base with user-friendly
interface, which lays a solid foundation for cross-selling opportunities for us. With our scalable
business model and large customer base, we believe that we are well-positioned to expand beyond
insurance market to provide a comprehensive suite of financial services and drive further growth.

Proprietary technologies and powerful cloud-based infrastructure

We have made significant investments in developing proprietary technologies that are catered to
our unique business needs. Our proprietary technology platform, “Wujieshan”, is based on a robust
cloud-based system, with advantages in stability, speed and scalability. Powered by our cloud-based
infrastructure, we are able to handle a large amount of transactions simultaneously. Because of our
scalable technology platform, we are able to accommodate the enormous surge in transactions on
major promotion events such as Double 11 Shopping Festival. During the Double 11 Shopping Festival
in 2016, we sold over 200 million policies within one week, with peak processing volume reaching
approximately 13,000 policies per second. With the automated feature of our platform, our system
allocates resources based on the actual utilization, which we believe significantly reduces operational
expenses. Given the nature of our business which involves sophisticated financial transactions,
dynamic pricing and risk management, we are one of the few insurance companies in China that has
the capability to fully operate on the cloud-based platform with high security standard while achieving
an average response time within five seconds to cyber-attacks.

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In addition to our Wujieshan platform, we also developed artificial intelligence capabilities such
as machine learning, deep learning, and natural language processing (NLP) to optimize product
features quickly to increase customer acceptance. We also integrated our remote identification
recognition, image recognition, machine learning and deep learning capabilities extensively to support
our risk management. For example, we are able to achieve automation in real-time risk control which
greatly improves the efficiency of our product development and upgrade. Our advanced image
recognition technology provides us with an unique competitive advantage in optimizing our
underwriting and claim settlement process for our innovative products such as our Phone Screen Crack
Policy. Our smart automated chatbot is replacing customer service representatives, which reduces our
human resource expense and improves customer satisfaction by providing 24-7 real-time assistance
and service. Our machine learning capabilities allow us to continuously improve the degree of
confidence in predicting customer behavior.

Our chief technology officer, Mr. Xing Jiang, has over 15 years of experience in IT engineering
and was the chief technology officer of Taobao Marketplace. As of March 31, 2017, we had a strong
research and development department with approximately 860 engineers. Our research and
development investments reached RMB214.4 million in 2016 and RMB91.7 million in the first quarter
of 2017, representing 6.3% and 8.9%, respectively, of our GWP in the same periods. We integrate our
technology team with different business departments. They work closely to provide solutions in every
aspect of our business, including pricing and underwriting, cooperation with our partners, and
technical support. All of these have contributed to speedy product launch and better customer
experience. Our typical product development cycle, which adopts stringent product review and risk
management control, is five to ten days. We believe our efficiency and our speed-to-market
implementation have given us a significant competitive edge in the rapidly evolving Insuretech
industry.

Extensive user data and strong data analytics capabilities

Our extensive user data originates from our large and expanding customer base and third-party
data providers. We have successfully connected our systems to a number of major data service
providers, such as PBOC credit reference center, the identification database of the Public Security
Bureau, Sesame Credit, Qian Hai Zheng Xin, Lawxp.com (匯法網), Tongdun (同盾) and Bairong
Financial (百融金服). Capitalizing on our rich data sources, we are able to identify and portrait our
customers as well as to analyze their online behaviors and consumption patterns in different
ecosystems.

With approximately 860 experienced engineers and technical staff, among which more than 100
engineers have expertise in finance and insurance industries, we have designed a system which can
efficiently and accurately collect and analyze a large amount of user data to create customer profiles.
We adopt customer intelligence analytics tools to obtain detailed understandings of customer
behaviors. We enhance our models based on iterative learning in operating our businesses, and
gradually improve accuracy and comprehensiveness of customer profiles. Such models include claims
analysis, profitability analysis, segment analysis, behavioral model, correlation model, fraud detection

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model and event forecast model. Furthermore, our cloud-based infrastructure allows us to analyze a
large amount of data simultaneously and update user database and user profiles quickly. We believe
our user profiling capability is difficult to replicate and represents a significant competitive
advantage.

The application of our big data analytics throughout the insurance value chain enhances our
business performance and results of operations. Through our deep understanding of the customer
behaviors, we tailor the scenario settings and pricing to provide attractive value proposition to our
customers and drive our growth. For example, we have been able to attract and retain high-quality
customers for our consumer finance products with our advanced customer profiling capabilities. We
are also able to improve the efficiency of our sales and marketing with our deep understanding of
customer preferences based on data analytics. For example, we adjust the frequency and timing of the
push notifications from our mobile application, WeChat public accounts and QQ public account
according to the customers’ daily routine and create an ideal scenario setting to market products. Our
sophisticated data analytics capabilities have enabled us to continuously enhance user experience,
improve our ability to attract and retain customers and improve our operating efficiency.

Sound corporate governance and robust risk management

We establish our corporate governance structure and risk management system based on the
relevant rules and regulations issued by CIRC with reference to certain industry best practice. Our
board of directors has established a risk management committee to oversee the overall corporate
governance and risk management policies and procedures. Our management team comprising of risk,
legal and compliance professionals contributes to our risk management efforts. We also include
personnel with relevant expertise within each business department to ensure timely response and
efficient communication. We have adopted a set of policies and procedures to evaluate and manage
risks typically associated with the insurance and consumer finance industry, including insurance risk,
market risk, credit risk, operational risk, strategic risk, reputational risk and liquidity risk.

To protect against insurance risks, we combine actuarial science with big data technology to
enhance product pricing and quantify risk correlations. Our technology-enabled platform allows us to
reduce fraud risk. For example, we are able to automatically track boarding status for the insured
under Flight Delay Policy. In consumer finance ecosystem, we have established strict criteria in
evaluating customer credits and verifying the identity and profile of individual borrowers to estimate
the likelihood of fraud and default.

Our data-driven risk management system provides real-time risk tracking and dynamic pricing
capabilities. We closely monitor the performance of our products and optimize them to achieve target
profitability. We track performance indicators for various risk factors on a real-time basis and make
timely adjustments to risk allocations and actively manage risks in the changing environment. We also
actively monitor new product launches and support ongoing optimization of new products.

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Visionary management team and entrepreneurial corporate culture with support from
shareholders

Our management team with extensive experience and knowledge in both technology and
financial services industries have been instrumental in driving the success of our business. Led by our
Chairman, Yaping Ou, a successful entrepreneur, the founder of two public companies and the
controlling shareholder of a company listed on Main Board of the Stock Exchange, our senior
executive officers each has over a decade of experience in finance, business development, internet
product development, insurance management and technology fields.

Our founders and senior management have nurtured a unique corporate culture of
entrepreneurship, innovation and team work with a goal to revolutionize China’s insurance market. We
believe our lean start-up style organizational structure encourages product managers to take more
responsibilities and enhance the operational efficiency. We adopt an integrated operating model with
business departments led by experienced product managers with a team of members each specializing
in technology, business development, risk management, and sales and marketing. We aim to emphasize
both technology innovation and financial expertise. As of March 31, 2017, we had approximately
1,100 employees with technology background, and approximately 300 employees with finance
background, totaling approximately 79% of all our employees, which demonstrated our strong focus
on bridging technology and finance. Moreover, a majority of our mid-level management team has
working experience in China’s leading technology companies, such as Alibaba and Tencent, or
financial service companies, such as Ping An Insurance, and brings us sophisticated operational
experience they obtained from their experiences. We set individualized goals of objective and key
results (OKR) for each business department to encourage innovation.

Our management team’s collective experience, strong execution capabilities and entrepreneurial
corporate culture pave the way for the successful operation of our businesses. This success is
demonstrated by our track record of maintaining our industry leading position and achieving a rapid
growth since our inception in 2013. Our founders and substantial shareholders, including Ant
Financial, Tencent and Ping An Insurance, provide us with strong business support, including access
to China’s leading online ecosystems.

OUR STRATEGIES

Our mission is to redefine insurance through connecting ecosystems and applying cutting-edge
technologies. Specifically, we plan to implement the following strategies:

Further grow our customer base and GWP

We seek to expand our customer base and grow our GWP by implementing various branding
initiatives and targeted marketing as well as expanding the depth of our customer-centric services
through our proprietary platforms.

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We plan to continue to cooperate with our ecosystem partners to further increase our customer
reach. We seek to strategically deploy marketing initiatives to reach potential customers and to
facilitate the conversion of paying customers through our innovative product offerings and accurate
customer profiling.

We believe that building our brand and strengthening our reputation for providing innovative
products and solutions are critical to our success. We intend to continue to improve our brand
recognition and customer loyalty by better understanding customers’ needs and refining our data
analytics capabilities.

We also intend to further enhance the efficiency of our customer service and the functionality of
our platform to improve our customer experience and enhance customer loyalty. We seek to increase
both average premium per policy and annual premiums per customer to ultimately maximize
customers’ lifetime value.

In the next few years, we plan to focus on further penetrating the consumer finance, health and
auto ecosystems and aim to achieve significant GWP growth in these ecosystems, while maintaining
moderate growth in the lifestyle consumption and travel ecosystems.

Enhance our profitability by expanding and optimizing the product mix

We seek to enhance our profitability by expanding and optimizing our product mix. We will
continue to develop innovative new products and solutions and upgrade existing products and
solutions. By leveraging our experience in the three core ecosystems, namely, lifestyle consumption,
consumer finance and travel, we are well-positioned to develop scalable and replicable operations. We
believe we can replicate our business operations in those mature core ecosystems into other
ecosystems with great growth potential, such as health and auto ecosystems. Furthermore, we plan to
continue to increase our focus on the ecosystems with higher profitability during the Track Record
Period, namely, health and consumer finance ecosystems. Based on our operating experience, we
believe that the major products we offer in health and consumer finance ecosystems have higher
profitability due to its lower distribution costs and more favorable loss experience. We aim to increase
profitability of our overall business by increasing the GWP contribution from these ecosystems.

Our goal is to expand our product portfolio through scenario-based setting to tap into customers’
everyday lives beyond traditional insurance. We aim to connect with smaller ecosystem partners. In
addition, we will further promote sales on our proprietary platforms by increasing advertising
expenditures as well as offering products that can be used across different platforms. For example, we
are expanding our MaShangFei products to cover a broad spectrum of customers’ travel-related needs.
Based on our operating experience, we believe sales through our proprietary platforms and sales
through cooperation with smaller ecosystem partners generally incur less expenses as a percentage of
GWP. We also plan to focus on cost control over handling charges and commissions as well as
technical service fees. In the medium to long term, we aim to lower our combined ratio to under 100%
and realize underwriting profit.

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In addition, we are currently in the process of applying for a license to offer life insurance
products. We believe as we accumulate more experience and data, we will be able to offer innovative
solutions to various new areas of risks without incurring substantial additional cost.

We intend to enhance our speed-to-market product engineering to capitalize on market


opportunities we identify. We plan to utilize our big data analytics capabilities to refine our pricing
and adjust product features to enhance our profitability. We also plan to leverage our proprietary
platforms to develop and offer integrated financial services.

Strengthen our technology leadership and big data analytics capabilities

We strive to solidify our leadership in technology. We intend to continue devoting substantial


resources to our research and development efforts and to seek top engineering talents in the industry.
We plan to continue to establish cooperation with leading universities and laboratories such as Fudan
University.

In July 2016, we incorporated ZhongAn Technology, which focuses on research and development
of internet technologies, as well as exporting and monetizing such technology solutions, including
artificial intelligence and blockchain. We plan to continue to expand the use of blockchain in our
business operations and connect with other enterprises across different industries in China. We believe
it will benefit us by speeding up and simplifying new customer onboarding process, implementing
automated underwriting and claims settlement, increasing effectiveness in fraud detection and pricing,
reducing administrative expenses and safeguarding our customers’ data privacy.

We plan to further develop and refine our big data analytics capabilities and to improve our user
profiling which will be valuable in target marketing. Based on such approach we are targeting to create
and maintain a pre-approved list of high quality customers for our consumer finance insurance
products. We also intend to further invest in our cloud-based infrastructure to enhance system
efficiency and stability. Combined with our efforts in enhancing big data analytics capabilities and
leveraging our large customer base, we believe we can create more value for our customers and
ecosystem partners in each step of the insurance value chain.

Further drive operating efficiency

We plan to enhance our core competencies in risk management, internal control and asset
management to further drive our operating efficiency.

We intend to reinforce risk management culture among our management and staff by focusing on
cultivating our core value as a responsible company that brings insurance closer to consumers’ daily
lives. We will continue to invest in new risk management technologies and focus on providing
comprehensive trainings to our staff.

We will continue to develop our lean organizational structure and integrated operation model
with entrepreneurial spirit, while implementing an efficient central management system to coordinate
among business departments to improve operating efficiency. By developing and optimizing our
back-office support mechanism and framework, we believe we will be able to further drive our overall
growth.

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We also plan to build a professional investment team with strong market knowledge to refine our
investment strategies and to improve return, liquidity and risk profiles for our investment.

Foster sustainable ecosystems by connecting with more ecosystem partners

Building on the foundation of our insurance-centric open platform and large customer base, we
plan to foster and grow sustainable and connective ecosystems across each aspect of the industry value
chain, adding to the value propositions we bring to our customers and our ecosystem partners. We
aspire to maximize the connections and sharing among ecosystems.

We will continue to work with our ecosystem partners to develop new products. We seek to
expand our distribution capabilities through partnerships with a variety of channels and through our
own platform. We also plan to deepen our cooperation with smaller ecosystem partners. In particular,
we plan to provide standard products and services via APIs to smaller ecosystem partners. By
providing them with related technological support, we expect to enjoy lower rates of handling charges
and commissions, and technical service fees when we cooperate with smaller ecosystem partners. In
addition, we intend to partner with more companies and expand beyond internet through
online-to-offline initiatives, internet of things and internet of vehicles. Our goal is to continue to
enhance our core competency, solidify our leadership position and create entry barriers for potential
competitors.

We will also explore investment, acquisition and business collaboration opportunities with
prudence and will consider opportunities that complement or enhance our existing operations and are
strategically beneficial to our long-term goals.

OUR INNOVATIVE BUSINESS MODEL

Ecosystem-oriented insurance products and solutions

We design and offer ecosystem-oriented insurance products and solutions through scenario-based
settings. We embed our products into our ecosystem partners’ platforms. Therefore, our customers
enjoy a simple insurance experience in the consumption scenario. We accumulate customer data
originating from the cooperation with a number of our ecosystem partners when we offer our insurance
products and solutions. Based on the in-depth and comprehensive understanding of our customers’
behaviors, we develop innovative products and solutions, offer dynamic pricing, automated claim
settlement and ensure effective risk management. Our advanced technologies and core competencies
power our innovative business model and distinguish us from our competitors.

The evolution of our ecosystems

Within each ecosystem that we tap into, we first cooperate with the ecosystem partners operating
the leading platforms in the ecosystem. We then gradually expand our product offerings tailored to the
leading ecosystem partners. After we establish mature cooperation with the leading ecosystem
partners, we build on our experience and extend our cooperation with other ecosystem partners,
including those smaller, more specialized or offline players. In addition, we sell certain insurance
products through insurance agents.

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We also sell certain insurance products on our proprietary platforms and grow our customer base
on our own platform. We have developed insurance products and solutions covering multiple platforms
and distribute through our own channels, such as our mobile application, websites, WeChat public
accounts and QQ public account. We seek cross-selling opportunities among customers and maximize
customers’ lifetime value.

The diagram below sets forth the evolution of our ecosystems:

Leading
ZhongAn Insurance product Customers
ecosystem partners

Insurance product 1

Leading
ZhongAn Insurance product 2 Customers
ecosystem partners
••• •••

Insurance product N

Leading
Insurance product 1
ecosystem partners

Smaller/more
ZhongAn Insurance product 2 specialized Customers
ecosystem partners
••• •••
Insurance agents
and offline
Insurance product N ecosystem partners

Direct access

Leading
Insurance product 1
ecosystem partners

Smaller/more
ZhongAn Insurance product 2 specialized Customers
ecosystem partners
••• •••
Insurance agents
and offline
Insurance product N ecosystem partners

Insurance product
direct to Customers

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OUR ECOSYSTEMS, PRODUCTS AND OTHER VALUE-ADDED SOLUTIONS

The following table sets forth the expense, loss and combined ratio for the periods indicated:

For the three months ended


For the year ended December 31, March 31,

2014 2015 2016 2016 2017

(percentage (%))
(unaudited)

Loss Ratio . . . . . . . . . . . . 73.4 68.5 42.0 46.7 44.7


Expense Ratio . . . . . . . . . . 35.2 58.1 62.7 65.6 78.4
Combined Ratio . . . . . . . . 108.6 126.6 104.7 112.3 123.1

Overview of Our Ecosystems

Currently, our products and solutions are primarily offered in the context of five major
ecosystems, namely lifestyle consumption, consumer finance, health, auto, and travel ecosystems.

The following table sets forth a breakdown of our GWP by each ecosystem for the periods
indicated:

For the three months ended


For the year ended December 31, March 31,

Ecosystems 2014 2015 2016 2016 2017

(in thousands of RMB)


(unaudited)

Lifestyle consumption . . . . 732,299 1,596,203 1,620,363 285,210 346,458


Consumer finance . . . . . . . 9,275 303,221 318,079 73,300 93,773
Health . . . . . . . . . . . . . . . . 11 19,225 235,927 16,316 190,059
Auto . . . . . . . . . . . . . . . . . — 511 3,724 118 1,495
Travel . . . . . . . . . . . . . . . . 44,271 322,099 1,081,643 204,203 331,825
Others . . . . . . . . . . . . . . . . 8,241 41,783 148,312 25,253 66,754
Total . . . . . . . . . . . . . . . . 794,097 2,283,042 3,408,048 604,401 1,030,363

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The following table sets forth a breakdown of (i) GWP, (ii) net written premiums, defined as
gross written premium less premium ceded to reinsurers, (iii) insurance claims paid less claims paid
ceded to reinsurers, (iv) handling charges and commissions net of reinsurance expense recovered, and
(v) technical service fees, which we paid to certain ecosystem partners under the cooperation
agreements, in absolute amounts and as percentages of our net written premiums from or by each
ecosystem for the periods indicated:

For the Year Ended For the three Months Ended


December 31, March 31,
Ecosystems 2014 2015 2016 2016 2017
RMB % RMB % RMB % RMB % RMB %
(in thousands of RMB, except percentages)
(unaudited)

Lifestyle
consumption
GWP . . . . . . . . . . 732,299 1,596,203 1,620,363 285,210 346,458
Net written
premiums . . . . . 727,811 100.0 1,591,907 100.0 1,620,363 100.0 285,210 100.0 346,458 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . 488,244 67.1 1,090,311 68.5 1,073,197 66.2 191,925 67.3 209,794 60.6
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . (1,117) (0.2) (864) (0.1) 282 0.0 8 0.0 2,705 0.8
Technical service
fee . . . . . . . . . 66,964 9.2 278,284 17.5 280,706 17.3 55,855 19.6 89,603 25.9

Consumer finance
GWP . . . . . . . . . . 9,275 303,221 318,079 73,300 93,773
Net written
premiums . . . . . 9,275 100.0 303,221 100.0 318,079 100.0 73,300 100.0 93,773 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . 1,285 13.9 43,617 14.4 44,962 14.1 18,231 24.9 56,255 60.0
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . 41 0.4 165 0.1 130 0.0 15 0.0 4 0.0
Technical service
fee . . . . . . . . . — — 99,559 32.8 65,861 20.7 12,613 17.2 19,656 21.0

Health
GWP . . . . . . . . . . 11 19,225 235,927 16,316 190,059
Net written
premiums . . . . . 11 100.0 16,964 100.0 203,456 100.0 13,840 100.0 156,930 100.0

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For the Year Ended For the three Months Ended


December 31, March 31,
Ecosystems 2014 2015 2016 2016 2017
RMB % RMB % RMB % RMB % RMB %
(in thousands of RMB, except percentages)
(unaudited)
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . — — 2,410 14.2 41,646 20.5 2,877 20.8 27,248 17.4
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . — — 1,053 6.2 13,793 6.8 1,106 8.0 27,680 17.6
Technical service
fee . . . . . . . . . — — — — 26,777 13.2 2 0.0 3,680 2.3
Auto
GWP . . . . . . . . . . — 511 3,724 118 1,495
Net written
premiums . . . . . — — 511 100.0 3,724 100.0 118 100.0 1,495 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . — — 61 11.9 621 16.7 10 8.5 597 39.9
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . — — — — 75 2.0 — — 59 3.9
Technical service
fee . . . . . . . . . — — — — 4,609 123.8 22 18.6 1,710 114.4

Travel
GWP . . . . . . . . . . 44,271 322,099 1,081,643 204,203 331,825
Net written
premiums . . . . . 43,948 100.0 319,203 100.0 1,076,793 100.0 203,287 100.0 330,075 100.0
Insurance claims
paid less claims
paid ceded to
reinsurers . . . . . 143 0.3 36,369 11.4 151,011 14.0 30,135 14.8 43,184 13.1
Handling charges
and commissions
net of reinsurance
expense
recovered . . . . . 17,720 40.3 91,256 28.6 240,241 22.3 38,184 18.8 66,656 20.2
Technical service
fee . . . . . . . . . 25,200 57.3 190,008 59.5 633,466 58.8 120,036 59.0 197,782 59.9

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Lifestyle Consumption Ecosystem

Overview

China’s retail industry has experienced substantial growth as a result of rising disposable income
and increased urbanization. Due to China’s large population, the wide variety of consumer behaviors
and increasing purchasing power across the country, online retail consumption has been growing
significantly and the use of consumer electronic devices has become an integral part of people’s daily
lives in China. We integrate with e-commerce platforms to serve consumers’ needs arising in online
retail consumption. We also cooperate with offline electronics device providers and repair services
providers to serve consumers’ needs arising in electronics consumption.

In the lifestyle consumption ecosystem, we sell our products mainly through our ecosystem
partners by embedding our products into their platforms. Our ecosystem partners include, among
others, Taobao Marketplace, Juhuasuan, Jiyoujia, Alipay, Tmall, Mogujie, DJI (大疆無人機). We
mainly sell our Shipping Return Policy, Merchant Performance Bond Insurance and Phone Accident
Policy through our ecosystem partners. We also sell Logistics Liability Insurance through insurance
agents, as well as Drone Accident Policy through our proprietary platforms.

As of March 31, 2017, our e-commerce business department had 27 employees, among which six
were product managers; our consumer electronics business department had 22 employees, among
which eight were product managers. In 2014, 2015, 2016 and the first quarter of 2017, we sold
approximately 1,070.7 million, 2,533.1 million, 3,468.7 million and 981.2 million policies,
respectively, in the lifestyle consumption ecosystem, and recorded GWP of RMB732.3 million,
RMB1,596.2 million, RMB1,620.4 million and RMB346.5 million, respectively. In 2014, 2015, 2016
and the first quarter of 2017, our lifestyle consumption related insurance products served
approximately 197.0 million, 297.9 million, 308.8 million and 201.3 million customers, respectively.

E-commerce

According to the Oliver Wyman Report, China’s online retail market measured by gross
merchandise value was RMB5.3 trillion in 2016 and is expected to reach RMB12.6 trillion by 2021,
representing a CAGR of 18.9%. Along with the increase in online shopping, the need for protection
against various risks related to such consumption has significantly increased. For example, although
the sellers on e-commerce platforms typically provide product return or exchange services in
compliance with the relevant consumer protection laws, as well as the policies of the e-commerce
platforms, the shipping expenses create a burden for the buyers, or render the product return process
not economical. Our Shipping Return Policy covers the shipping expenses by charging a small
premium, which in turn encourages customers’ purchases and creates value for e-commerce platforms.

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In November 2013, we partnered with Alibaba to launch our Shipping Return Policy on its
Taobao Marketplace and Tmall. Our Shipping Return Policy is embedded into the e-commerce
platforms of our ecosystem partners. During the check-out process on these platforms, they are
automatically presented with the option to purchase various add-on services, including shipping return
insurance. Our ecosystem partners will then allocate shipping return policies from various providers
to these consumers.

Through cooperation with Alibaba, we expanded beyond shipping return insurance, and
introduced online payment security insurance, account security insurance and other insurance products
on the platforms of Alibaba or its subsidiaries to better serve customers. We have also expanded our
products beyond Alibaba platforms to serve a wider range of e-commerce platforms, such as Weidian
(微店), Chuchujie (楚楚街) and Xiaomi Pay (小米支付). With the data aggregated through our
operations, and our advanced pricing and risk management model, we introduced our whole-network
product Generic Buyer Version of Shipping Return Policy (任性退), which enables qualifying
customers to return goods which were purchased from major e-commerce platforms by paying a
monthly insurance premium. In the event that consumers opt to return or exchange the qualifying
products they had purchased, SF Express or our other contracted couriers would pick up and ship back
the products purchased at low or no costs. As of March 31, 2017, we had worked with SF Express for
logistics service in 325 cities at municipal level and 1,737 cities at district or county level in China.
In this way, we provide a more comprehensive and diversified insurance protection to our e-commerce
related ecosystem partners.

We analyze data to understand behaviors of merchants and consumers on e-commerce ecosystem


partners’ platforms. We develop knowledge of customers’ behaviors across platforms and create
multi-dimensional customer profiles. We realize real-time personalized pricing and dynamic risk
management based on the model jointly developed with our ecosystem partners. Our advanced
cloud-based platform enables us to handle a large number of transactions simultaneously. During the
Double 11 Shopping Festival in 2016, we underwrote over 200 million policies within one week and
processed approximately 13,000 policies per second at the peak.

Consumer Electronics

The use of consumer electronics devices has become an integral part of people’s daily lives in
China. According to China Internet Network Information Center, the penetration rate of mobile
devices over total internet users reached 95.1% in China as of December 2016. Given the popularity
of smart devices and the restrictions of standard limited warranties provided by the manufacturers, we
recognize customers’ needs for alternative or extended coverage for their consumer electronics to
serve their pain points, such as accidental phone screen cracks and other phone damages.

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In July 2014, we partnered with Xiaomi, one of the leading smartphone manufacturers in China,
to offer insurance against phone screen cracks and other phone damages to customers who purchase
the newly launched Xiaomi smartphones. Customers will automatically be advised to purchase our
policies when they purchase a new Xiaomi smartphone, and will be reimbursed when a phone screen
is damaged or other insured accident occurs. We then extended our coverage to used phones. We apply
image recognition technology to examine phone conditions remotely and to verify whether the
underwriting requirements are met. These technologies enable us to detect and prevent fraud. We also
gradually refine the accuracy of our identification capability through machine-learning. With these
technologies, we further extended our insurance products to cover a wide variety of consumer
electronics, including tablets and laptops from major manufacturers. In addition, we expanded our
coverage from online to offline ecosystem partners, such as SanPower PC Mall to offer extended
warranty, quality assurance and screen crack insurance for consumer electronics sold in their stores.
We also extended the offering of electronics-related insurance to more customers through our
proprietary platforms.

To provide customers with better repair services and to lower our claim expenses, we facilitate
third-party repair services through our partner specializing in connecting users with repair and
delivery service providers. We also developed a monitoring and evaluation system to closely monitor
the progress and quality of third-party repair services. As of March 31, 2017, we connected with more
than 30 third-party maintenance and repair service providers through our partner’s platform. With this
model, we were able to serve up to 10,000 devices per month in the first quarter of 2017, and enable
manufacturers of consumer electronics and supporting networks to be connected through our partner’s
platform to create more value for our customers. As a result, we are able to provide speedy services
at lower costs. We are also able to accumulate a large amount of data related to repairs to improve our
pricing and risk management.

Our Key Products

Shipping Return Policy (“ 退貨運費險 ”)

We launched our Shipping Return Policy on Alibaba’s Taobao Marketplace and Tmall in
November 2013. We offer two versions of Shipping Return Policy for merchants (seller version) and
purchasers (buyer version), respectively. Buyer version policies are purchased by consumers. Seller
version policies are purchased by merchants for the benefit of consumers who purchase their products.

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The policy covers the shipping fees for returning products purchased on the e-commerce
platform by reimbursing to the merchants or the purchasers for the shipping cost incurred. The
premiums of the Shipping Return Policy range from RMB0.15 to RMB3.3 per policy for seller version
and from RMB0.2 to RMB9.9 per policy for buyer version based on the results of our dynamic pricing
model. We determine the premium based on various factors, such as transaction amount or volume and
distance of delivery. For the merchants, we also consider the scope of their businesses and adjust risk
level on an ongoing basis. It typically takes less than 72 hours to approve a claim and we directly settle
the claims by transferring funds to the customer’s Alipay account. Through this process, our policies
alleviate customers’ concerns about returning purchased items, which would ultimately increase the
transaction volume on our ecosystem partners’ platforms.

Shipping Return Policy was our top product in terms of GWP during the Track Record Period.
We generated RMB613.1 million, RMB1,298.2 million and RMB1,193.6 million in 2014, 2015 and
2016, respectively, and RMB206.1 million and RMB257.8 million in the three months ended March
31, 2016 and 2017, respectively, from the sale of our Shipping Return Policy. As we continued to
diversify our product mix and allocate sale and marketing resources to other products, the GWP
generated from our Shipping Return Policy decreased slightly in 2016.

Generic Buyer Version of Shipping Return Policy (“ 任性退 ”)

In October 2016, we launched our Generic Buyer Version of Shipping Return Policy, a shipping
return insurance that provides product-return services on major e-commerce platforms that we partner
with.

During the policy period, our customer is entitled to receive up to three kilogram complimentary
shipping return services for any purchase across major e-commerce platforms that we partner with.
The monthly premium of our Generic Buyer Version of Shipping Return Policy is RMB9.9 and is
automatically renewable. We also cooperate with logistics service providers for the door-to-door
pick-up and delivery services within two hours of the claim.

Merchant Performance Bond Insurance (“ 商家保證金保險 ”)

Through cooperation with Taobao Marketplace and Tmall, we provide insurance solutions to
reduce deposit requirements for merchants operating on Taobao Marketplace and Tmall. For example,
merchants are generally required to pay a deposit to Alibaba to cover the costs of customer
indemnification and other customer protection services provided by Alibaba’s platforms. We launched
our Merchant Performance Bond Insurance named Zhong Le Bao (“眾樂寶”) on Alibaba’s Taobao
Marketplace in November 2013 and launched the similar product named Can Ju Xian (“參聚險”) on
Tmall in March 2014. If a merchant purchases our Merchant Performance Bond Insurance, it will not
be required to pay any deposit to Alibaba. The insurance premium payable is a relatively small amount
compared to the deposit. For example, the premium for Zhong Le Bao is 1.8% of the deposit otherwise
payable for a term of six months, or 3.0% of the deposit otherwise payable for a term of one year. In
the event that a merchant has to indemnify a purchaser in a transaction, Merchant Performance Bond

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Insurance also offers advance indemnification to the purchaser up to a certain amount. This was the
first insurance solution designed specifically for merchants that participate in the deposit program on
Alibaba’s platforms, which has improved merchants’ liquidity by eliminating Alibaba’s deposit
requirements.

Phone Accident Policy (“ 手機意外險 ”) and Phone Screen Crack Policy (“ 手機碎屏險 ”)

In July 2014, we launched our Phone Accident Policy to offer insurance for phone screen and
other damages. The policy covers repair services for newly purchased Xiaomi mobile phones if
qualified accidents occur to an insured device. We further launched our Phone Screen Crack Policy
in June 2016 to cover damages to screens of new and used phones by providing a one-time free repair
within a year.

Our Phone Screen Crack Policy covers phones from major manufacturers with average premiums
of RMB50.2 in the first quarter of 2017. In addition to Xiaomi, we also sell our Phone Screen Crack
Policy through Leshang, other insurance agents, our own mobile applications and other channels. We
are able to track the unique identification of the insured phone through our pre-installed mobile
application. Our customers are required to use another phone to submit a picture of their phone screen
when purchasing our Phone Screen Crack Policy. Our image recognition system examines whether the
conditions of the phone screens meet the underwriting requirements. Once a claim is approved, we
inform our service platform to arrange repair services for our customers, who have the options to
request on-site repair, complimentary pick-up or drop-off at designated processing centers free of
charge. We arrange and monitor the repair process through a service platform that connects repair
service providers to ensure service quality. Due to our ability to manage the repair process effectively
and efficiently, we are able to offer customers high quality repair service that covers many different
models of devices. We also offer our General Screen Crack Policy (“碎屏險”) through our own mobile
applications and other online and offline channels to cover other mobile devices such as tablets.

Other Products

In addition to the key products, we also develop and offer various innovative products in the
lifestyle consumption ecosystem, such as Furniture Protection Policy (“極有家家装保障險”), a
comprehensive insurance product for merchants on Jiyoujia home interior fitting platform, a one-stop
online home interior fitting store of Alibaba, which covers shipping return insurance, cargo insurance
and product quality bond insurance, Drone Accident Policy (“無人機意外險”), a third party liability
insurance covering the property loss or personal injury or death caused by drone crashes and Account
Safety Policy (“帳戶安全險”), a policy that covers any loss incurred by the customers on an online
payment platform, such as Alipay, due to a fraudulent payment and Mobike E-commerce Platform
Liability Insurance (“摩拜電商平台責任險”), which covers personal injuries and medical expenses
caused by accidents happened during the ride of bicycles of Mobike.

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Consumer Finance Ecosystem

The fast growth of consumer consumption and the increasing consumer finance demand in China
have created a strong market for credit guarantee services. According to the Oliver Wyman Report,
China’s consumer finance market is expected to increase from RMB5.7 trillion in 2016 to RMB13.7
trillion in 2021, representing a CAGR of 19.2%. However, the credit infrastructure in China is
currently underdeveloped due to the lack of complete credit information. Leveraging our
technology-empowered risk management system, we provide credit guarantee insurance and solutions
with both ecosystem partners with consumer finance capabilities such as Zhaocaibao and Xiaoying and
our ecosystem partners with no consumer finance capabilities such as Mougujie and China Telecom.

For ecosystem partners with consumer finance capabilities, we provide credit guarantee
insurance policies to the borrowers or funding providers on these platforms to facilitate the
transactions. In 2014, we first partnered with Zhaocaibao, a leading digital financial service platform,
to offer credit guarantee services to lenders and borrowers on Zhaocaibao. Our credit guarantee
insurance policies enhance consumer credits for borrowers or provide assurance for funding providers
who are connected on Zhaocaibao. In addition, we also provided credit guarantee insurance on cash
out loans offered by Zhaocaibao. Zhaocaibao customers can cash out on their investments before the
maturity by applying for cash out loan using the proceeds to be received at the time of maturity of such
investment as source of repayment. The investment products on Zhaocaibao were generally insured by
other financial institutions and we have no longer provided credit guarantee insurance with cash out
loan on Zhaocaibao since the middle of 2016.

In addition, we cooperate with Xiaoying’s subsidiaries, including certain asset management


companies and a factoring company, to connect consumer finance platforms with funding sources.
Xiaoying’s affiliated asset management companies and factoring company acquire asset packages and
sell the asset packages to funding providers we partner with, including banks, assets management
department of securities companies, trusts and factoring companies. To facilitate the transaction, we
provide credit guarantee insurance on the consumer loans underlying these asset packages. In addition
to Zhaocaibao and Xiaoying, we have expanded to collaborate with various ecosystem partners and
have jointly launched credit guarantee services on their platforms such as Mime Financial.

For the ecosystem partners without consumer finance capabilities, we provide credit solutions,
including risk control and assets evaluation services to address consumer finance needs. Our credit
guarantee insurance policies can enable our ecosystem partners with no consumer finance capabilities
to offer consumer finance services such as installment services and cash loan services. In 2015, we
expanded our partnership to an online merchant, Mogujie, to offer insurance to facilitate borrowing
by online shoppers and helped Mogujie to connect the borrowing requests generated by its shoppers
to funding providers. In addition to Mogujie, we also provided credit solutions to address the
consumption needs arising from China Telecom, Secco and Spring Airlines.

Powered by our big data analytics capabilities, we conduct multi-dimensional analysis of a


borrower’s profiling and evaluate credit risks based on such borrower’s consumption behaviors, and
further achieve real-time credit rating and immediate borrower installment services. We analyze

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multi-dimensional factors, including educational background, gender, age, address, credit information
in PBOC’s system, time spent on mobile devices and annual consumption amount to provide credit
guarantee insurance to facilitate consumer borrowings. If the borrowers were to default, insurance
claims would be paid to the funding providers to cover their losses.

We plan to establish a joint venture of a small loan company within the next year as we further
develop in the consumer finance ecosystem. The small loan company is expected to use its own capital
and other legally permitted sources of funds to finance the small loans it will extend, while we can
provide credit guarantee insurance on such loans. It is expected to supplement the funding resources
alongside the funding providers. We envision that the establishment of the small loan company will
support our business development in the consumer finance ecosystem. The small loan company may
further expose us to credit risk of borrowers in our consumer finance ecosystem. For further details,
see the section headed “Risk Factors — Risk Relating to Our Business — We are subject to credit
cycle and the risk of deterioration of credit profiles of borrowers and the risks associated with debt
recovery and collection for our consumer finance ecosystem, the occurrence of which will adversely
affect our results of operation and financial condition.” in this prospectus.

As of the Latest Practicable Date, we were one of the insurance companies in China granted
access to PBOC credit reference center, which provides us with access to customer’s official credit
record. In addition, we have developed a model to effectively identify potential fraud and high credit
risk. We developed robust risk control mechanism for our products in the consumer finance ecosystem
through the transaction cycle. We utilize our big data analytics and artificial intelligence to enhance
our understanding of risk profiles of individual customers. We monitor the status of the transactions,
the utilization of credit facilities and the potential fraudulent activities during the term of our credit
guarantee products. We closely track bad debt. We have generally relied on, and may continue to rely
on, our ecosystem partners and third-party collection agents for debt recovery and collection. See
“Risk Factors — Risks Relating to Our Business — We depend on our cooperation with our ecosystem
partners and other participants in the ecosystems. Our business may be affected if such partners do not
continue to maintain their relationship with us or by the operational failure of third-party ecosystem
partners” and “—We are subject to credit cycle risk and the risk of deterioration of credit profiles of
our customers and the risks associated with debt recovery and collection for our consumer finance
ecosystem, the occurrence of which will adversely affect our results of operations and financial
condition.”

We sell our consumer finance insurance products mainly through our ecosystem partners such as
Zhaocaibao and Xiaoying. For example, borrowers with loan demands and funding providers with
funding capabilities connected through Xiaoying’s platform can purchase our credit guarantee
insurance for consumer loans underlying the asset packages they are loaning out or investing in, in
order to enhance the credit of consumer loans underlying such asset packages. Please refer to “— Our
Key Products and Solutions — Our Solution for consumer finance partners — Baobei Open Platform
(保貝計劃).”

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For the year ended December 31, 2014, 2015 and 2016 and for the three months ended March
31, 2017, we operated in approximately 200 different consumption scenarios, served approximately
0.4 million, 8.8 million, 8.9 million and 1.6 million customers in consumer finance ecosystem,
respectively. In 2014, 2015, 2016 and the first quarter of 2017, we sold 0.5 million, 46.5 million, 24.4
million and 4.5 million policies, respectively, in the consumer finance ecosystem, and recorded GWP
of RMB9.3 million, RMB303.2 million, RMB318.1 million and RMB93.8 million, respectively. The
total underlying assets with our credit guarantee insurance as of December 31, 2014, 2015 and 2016
and March 31, 2017 was RMB2.6 billion, RMB23.6 billion, RMB61.7 billion and RMB54.2 billion,
respectively. We have relied on the cooperation with two major ecosystem partners, namely
Zhaocaibao and Xiaoying and its subsidiaries for the success and growth of our consumer finance
ecosystem. Approximately 67% and 20% of the underlying assets with our credit guarantee insurance
as of March 31, 2017 was from the policyholders from or through Zhaocaibao and Xiaoying,
respectively. Furthermore, GWP generated from or through Zhaocaibao accounted for approximately
13% of GWP generated from the sale of our credit guarantee insurance for the three months ended
March 31, 2017, and GWP generated from or through Xiaoying accounted for approximately 22% of
GWP generated from the sale of our credit guarantee insurance in the three months ended March 31,
2017.

Our Key Products and Solutions

Our Solution for consumer finance service providers — Baobei Open Platform (“ 保貝計劃 ”)

We launched our Baobei Open Platform in April 2016. Through Baobei Open Platform, we
connect consumer finance platforms with our financial institution partners, including banks, assets
management department of securities companies, trusts, finance leasing companies, microfinance
providers and factoring companies by utilizing our advanced technology and risk management
capabilities. Our credit guarantee insurance provides credit enhancement with respect to customers
who satisfy our risk management and creditworthiness requirements and borrow funds from our
financial institution partners. Through our Baobei Open Platform, we are able to connect the channels
and assist our ecosystem partners with their consumption installment services and cash loans services
through insurance products. We plan to expand the network of our business partners to work with more
fund providers with a wide variety of assets. We also provide our core capabilities in credit
management, asset management and risk management to the fund providers. Further, we embed the
credit assessment models of service providers into the models on the Baobei Open Platform, together
with our credit guarantee insurance, to increase the quality of assets and credits. As of March 31, 2017,
we had reached agreements with approximately 50 consumer finance service providers across
education, housing, cosmetic and automotive industries, such as Xiaoying, Zhaocaibao, Fenqile,
Wecash, Mime Financial, Yifenqi and others, as well as approximately 20 funding providers.

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Mashanghua (“ 馬上花 ”)

We launched our Mashanghua solutions in June 2017, through which we provide both online and
offline consumer financing services to consumers with financing needs in various scenario-based
settings. Mashanghua solutions primary target consumers such as frequent users of credit cards,
female customers, young generation, frequent travelers and other customers that have strong needs in
consumer financing services. To resolve their pain points and build a beneficial consumer finance
ecosystem for a number of participants, we build a dynamic information and credit platform
connecting with the online platforms of our ecosystem partners, service providers and financial
institution partners, including banks, funds, brokers and other financial institutions in order to expand
the coverage of consumer finance and related financial services. Our credit guarantee insurance of our
Mashanghua solutions facilitates credit line to consumers to fund their purchases in both online and
offline scenarios, covering their needs in various aspects of their daily lives. Both consumers and
financial institution partners providing funding sources to the consumers can be customers of the
credit guarantee insurance of our Mashanghua solutions.

We establish a central consumer finance system based on our multi-dimensional risk management
models as well as an automatic technology platform with the massive data accumulated from our
operations to evaluate the creditworthiness of consumers in different ecosystem scenarios. Through
such central consumer finance system, we set a centralized account for each consumer in order to track
his/her credit records and profiling and accordingly facilitate a long-term credit line that could be used
in a wide variety of scenario-based settings, such as clothing, eating, living, and transportation. Our
Mashanghua system has embedded consumer finance services to a wide-ranging aspect of consumers’
daily consumption. We first connected our Mashanghua system to a variety of scenario-based systems,
including Mogujie, an e-commerce platform targeting female consumers, Secoo, a luxury merchandise
platform, Spring Airlines, an airline carrier, China Unionpay Merchant Service, a financial service
platform for credit card issuers and Bestpay, a payment platform of China Telecom. In June 2016, we
cooperated with China Telecom to launch a new product whereby purchasers can make payments of
new phones by installments after purchasing such products from China Telecom. We plan to expand
the coverage of our Mashanghua system through cooperation with more ecosystem partners so as to
provide one-stop consumer finance services to consumers who have needs in a wide variety of aspects
of their lives.

Other Products

In addition to the key products and solutions, we also develop and offer various innovative
products in the consumer finance ecosystem, such as Quick Loan Policy (“ 速貸寶 ”), which covers
credit guarantee for qualified consumers in borrowing funds at a maximum amount of RMB80,000
from our financial institution partners, Hua Bao (“ 花豹 ”), which provides credit guarantee for
consumers to obtain consumer finance services from banks and financial institutions we cooperate
with. Currently, we sell Quick Loan Policy through Wangyixiaodai and sell Hua Bao through our
proprietary platforms.

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Health ecosystem

Because of the aging population and increased disposable income in China, healthcare has
become one of our key focuses. In China, healthcare expenditure is expected to grow from RMB 4.4
trillion in 2016 to RMB7.8 trillion in 2021, representing a CAGR of 12.1% according to the Oliver
Wyman Report. We design and offer innovative internet-based health insurance products to cover a
full array of healthcare needs. We integrate our health-related insurance business into the health
ecosystem to serve our customers’ needs for condition management and health protection in different
aspects of their lives.

In 2015, we began to cooperate with high-tech wearable devices manufactures, such as Mi Band,
Ledongli and Meizu, and offer innovative health insurance products, such as Walk to Wellness Policy
(“步步保”) by connecting personal exercise data with insurance product covering major diseases. We
further launched creative products focusing on prevention and care of chronic diseases, such as
Diabetes Policy (“糖小貝”), and realized personalized pricing through tracking data recorded by the
intelligent glucose meter provided together with our Diabetes Policy. We connect with medical device
manufacturers, health examination centers and clinics to launch insurance products targeting specific
diseases, such as female cervical cancer and breast-related diseases, childhood diseases and
dental-related medical treatment, and for the comprehensive health concerns of elderly people. In
addition, we designed general coverage policy, Personal Clinic Policy (“尊享e生”) to cover individual
customers for clinical visits and medical treatments within the claim range.

We sell our health insurance products mainly through insurance agents and ecosystem partners.
Customers can purchase our health insurance products through the platforms of our ecosystem
partners, such as iyunbao and Alipay. For example, our products are displayed in the insurance section
on the Alipay platform. We have established partnership with medical device manufacturers such as
Omron and online healthcare platforms such as We Doctor to expand our presence in the health
ecosystem. We also sell health insurance products on our proprietary platforms, including our
websites, our mobile application, our WeChat public accounts and our Tmall flagship store. In addition
to individual policies, we design customized group insurance products for our corporate and
institutional clients. Our group insurance products are sold to our corporate and institutional
customers by our group insurance direct sales representatives and third party agents, such as human
resources service companies and online social insurance providers. We design group health insurance
by leveraging our cloud-based platform and offer them an user-friendly platform to manage their
employees’ healthcare plans.

In 2015, 2016 and the first quarter of 2017, we sold approximately 0.05 million, 0.6 million and
0.6 million policies, respectively in health ecosystem, recorded a GWP of RMB19.2 million,
RMB235.9 million and RMB190.1 million, and served approximately 0.4 million, 1.3 million and 1.2
million customers through our health insurance products.

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Our Key Products

Individual Health Insurance Product — Personal Clinic Policy (“ 尊享 e 生 ”)

We launched our Personal Clinic Policy in August 18, 2016. Our Personal Clinic Policy provides
illness and disease insurance protections and medical benefits during the policy period, which is one
year from the effective date of the policy and is renewable.

The age of our customers for the Personal Clinic Policy ranges from 30 days to 60 years old, with
the renewal eligibility until 80 years of age. As of the March 31, 2017, the annual premiums of policies
from Personal Clinic Policy is approximately RMB450 per person, enabling the customer to be
eligible for an annual sum insured to the amount of RMB3 million for ordinary medical expenses plus
an additional RMB3 million for malignant tumor-related expenses that exceed the deductible of
RMB10,000. During the policy period, any and all expenses exceeding the deductible incurred in
tier-two or above hospitals in China in connection with ordinary illness or malignant tumor diseases,
including clinic fees, medical treatment fees, medicine expenses, medical operation fees, meal charges
and bed service fees are fully reimbursed. We sold our Personal Clinic Policy through a wide variety
of channels, including our own applications, our ecosystem partners platforms and third party sales
agents.

Our Group Health Insurance Plans

In 2015, we launched customized group insurance products for our corporate and institutional
clients and mainly sell these products through insurance agents. Our customers are employees of these
corporate and institutional clients. On our enterprise settlement platform, employees of our corporate
and institutional clients can directly apply and claim reimbursement for healthcare expenditures under
their plan and value-added services. If the amount claimed is less than RMB3,000, an employee can
be reimbursed within three working days by submitting the supporting materials electronically to the
settlement platform. We believe our group insurance services reduce human resources cost of our
clients in realizing employee benefits with more efficient settlement.

Individual Health Insurance Product — Walk to Wellness Policy (“ 步步保 ”)

We launched our Walk to Wellness Policy (“步步保”), an internet-based health management plan
to provide customized health protection to our customers for major diseases, in August 2015. The
implementation and terms of the plan depend on a customer’s actual number of steps everyday, which
is detected and tracked with the assistance of our ecosystem business partners, including Mi Band,
Ledongli App and WeChat.

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The plan contains an underlying health insurance for protection of major diseases and is sold
through our mobile application, WeChat public account, and on Ledongli App. Customers that are
eligible to be insured are at age from 18 to 55. The amount covered by the plan is either RMB100,000,
RMB150,000 or RMB200,000, corresponding to a target daily steps of 5,000, 10,000 and 15,000, and
the monthly premiums corresponding to each of these sums range from RMB7.4 to RMB155.2, from
RMB9.8 to RMB206.0 and from RMB11.3 to RMB238.8, respectively, based on the ages of the
customers. After the policy takes effect, we track our customer’s actual exercise amount and
dynamically adjust the premium to be paid by a policyholder next month based on his daily steps
recorded by such instruments. Our dynamic pricing system encourages our customers to better control
their health as they enjoy a lower premium with more exercise. As of December 31, 2016, more than
5 million of mobile application users have authorized us to obtain data on their walk steps.

This innovative product connects ecosystems and is in the early stage of development. We have
observed the growth of market acceptance since its launch.

Individual Health Insurance Product — Diabetes Policy (“ 糖小貝 ”)

We launched our big-data intelligent medical-insurance product, Diabetes Policy (“糖小貝”), in


November 2015. We primarily target people with diabetes-related problems. The Diabetes Policy is
sold together with an intelligent glucose meter provided through Tencare Doctor Tang (“糖大夫”), a
platform of Tencent, which tracks and monitors our customers’ health conditions by measuring their
daily glucose levels.

The annual premiums for our Diabetes Policy is RMB996. A customer is eligible for an
additional amount insured of RMB200 daily if he maintains their glucose level within a certain range,
up to an annual cap of RMB50,000 per customer. The glucose meter will also send dynamic data to
a customer’s WeChat account to generate a systematic report to reflect the customer’s health
conditions to motivate him to proactively manage his health. By this way, we are able to provide
advisory services to our customers to manage their health and we adjust the insured amount for each
customer based on his specific medical condition.

This innovative product provides value added services with integration of high tech devices and
is in the early stage of development. We have observed the development of market acceptance since
its launch.

Other Products

In addition to these products, we also offer other innovative products and value-added solutions
in the health ecosystem, such as Colorectal Cancer Policy (“腸命百歲”), which provides a variety of
protective services to our customers based on our customers’ exfoliated colo-rectal tumor cells
screening (結直腸癌早篩測驗), Home Medical Clinic Policy (“家庭守護互聯網醫院門診險”), the first

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online outpatient insurance product that covers partial internet clinic medical expenses of our
customers and Children Comprehensive Policy (“兒童綜合保險”), a policy that is specially designed
for children and covers a variety of risks, such as accidents, in-patient expenses and certain child
common disease. We sell Home Medical Clinic Policy through We Doctor and sell other products
through our proprietary platforms.

Auto Ecosystem

China is the largest auto market in the world and auto insurance is the largest component of the
property and casualty insurance market in China. According to the Oliver Wyman Report, the auto
insurance market in China is expected to continue to grow from RMB683 billion in 2016 to RMB1,171
billion in 2021, representing a CAGR of 11.4%. The development of transportation sharing economy
and the internet of vehicles create a natural incubator for technology-driven auto insurance. Currently,
auto insurance products and operating licenses are regulated by the CIRC and the CIRC normally will
consult with the specific local authorities in different regions where an applicant is intending to
engage auto insurance business. Our expanded business scope has included auto insurance business.
As of the Latest Practicable Date, we have obtained licenses permitting our auto insurance product in
18 regions in China covering the majority of the auto insurance market in China, as compared to
licenses in six regions as of December 31, 2016. We plan to apply licenses in other regions in the PRC.

In July 2015, we partnered with Ping An Insurance by signing a cooperation agreement and
jointly launched Baobiao Auto Insurance in November 2015. Under this cooperative arrangement, we
are in charge of sales and marketing of Baobiao Auto Insurance and are allocated 30% of the income
and expenses from the product, while Ping An Insurance is in charge of the claim settlement process,
and is allocated 70% of the income and expenses from the product. We are gradually cooperating with
more partners, such as Didi Chuxing, Xiaomi and WeChat, by embedding our products into their
platforms to reach out to more customers. We also sell our automobile tire damage insurance to
customers through platforms such as Tuhu. In addition to cooperating with our ecosystem partners, we
also sell our products through insurance agents and our proprietary platforms.

With our targeted marketing practices and streamlined purchasing and settlement process,
compared with traditional auto insurance, we connect online customer base with offline insurance
settlement providers and offer more convenient customer services, which enable us to tap into the
large auto insurance markets. We are developing a big data-powered technology platform capable of
conducting dynamic and personalized pricing. We are exploring collaborations with our ecosystem
partners, such as Didi Chuxing and Tuhu, and automaker partners, such as Chang’an Motors, to gather
and analyze relevant data regarding travel and vehicle information, which will be valuable for the
customized pricing and risk control for our auto insurance products in the future. We plan to extend
the coverage to the full automotive industry value chain, including products designed for used
vehicles, auto consumer finance, accident insurance and extended warranty.

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Auto insurance in China is subject to strict regulations, and the pricing and terms of auto
insurance products are rigorously regulated. However, in 2015, the PRC government formally
launched a reform of the regulation on the premiums of auto insurance products with the goal to allow
broader coverage of insured circumstances of auto insurance products, adjust claim settlement
standard from the perspective of insurance terms for the benefits of the insured, and release certain
restrictions on setting insurance price by insurance companies. Although auto insurance remains
subject to strict pricing regulations, we believe our dynamic pricing capability and asset-light business
model well position us to take advantage of future policy changes and along with the implementation
of the reform, if enforced, we believe our innovation and strong capability to reach customers can
enable us to further expand our coverage of auto insurance business and better serve more customers.

As of March 31, 2017, our auto insurance business department had 36 employees, among which
11 were product managers, who led teams dedicated to promoting and operating specific insurance
products. We first obtained license to operate auto insurance related business in six regions in China
in September 2015, and began to ramp up our operations in auto ecosystem in 2016. In 2016 and the
first quarter of 2017, we sold approximately 0.1 million and 0.1 million auto insurance policies,
respectively. We recorded a GWP of RMB3.7 million in 2016 and RMB1.5 million in the first quarter
of 2017 and served approximately 0.1 million and 0.1 million customers, respectively.

Our Key Products

Baobiao Auto Insurance (“ 保驫車險 ”)

We launched our Baobiao Auto Insurance in November 2015 in the regions that we have obtained
relevant licenses. The average premium for our Baobiao Auto Insurance is approximately RMB2,500
per insured vehicle, typically for a term of one year. The standard coverage includes: damages caused
to the insured vehicles by collision, fire, explosion, typhoon or mudslides, as well as damages when
the insured vehicle is stolen, etc. We also offer customized options to cover our automobile insurance
customers that cover losses such as liability to passengers and cargos.

We and Ping An Insurance jointly provide auto insurance pursuant to our cooperation agreement
on a 30% versus 70% basis and we split GWP and expenses based on such ratios. We plan to gradually
expand our cooperation with Ping An Insurance to provide auto insurance in more regions in China.
For example, we have entered into partnerships with online ecosystem partners, including Didi
Chuxing, Xiaomi and WeChat, to distribute our Baobiao Auto Insurance. We plan to submit
applications with CIRC for expanding auto insurance businesses into more regions in China.

Travel Ecosystem

People in recent years travel much more frequently than before for both business and leisure,
which drives the demand for travel-related insurance. According to the Oliver Wyman Report, the PRC
travel market amounted to RMB2.2 trillion in 2016, and is expected to grow to RMB3.9 trillion in
2021, representing a CAGR of 12.1%. We have witnessed the strong needs in air travel, which

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constitutes a significant majority of the overall PRC travel market, and have thus devoted to
developing and providing a large variety of customer-centric air travel insurance products in order to
address the customers’ pain points. We take advantage of the opportunities emerged from travel
ecosystem to offer innovative and simple solutions for travellers in every aspect of their travel plans
through cooperation with Chinese online and offline travel agencies.

In March 2014, we began to partner with Ctrip and launched our Flight Accident Policy to
compensate our customers who purchase flight tickets on Ctrip.com, in the event of an aircraft crash
in a flight accident. In January 2015, we further expanded the cooperation with Ctrip and developed
Flight Accident and Delay (“航意航延險”) to cover both travel accidents and flight delays for our
customers who purchase travel packages on Ctrip. We also designed and launched our Flight Delay
Policy as well as other travel related insurance products, such as trip cancellation insurance, ticket
refund insurance, train accident insurance, hotel cancellation insurance, travel destination weather
insurance and others. We are one of the third-party insurance service providers that embed their
products into Ctrip’s platform. When customers purchase tickets or other travel services on the
platform, they can also conveniently purchase related insurance policies. Ctrip will then allocate the
insurance policies purchased by its customers to different third-party insurance service providers
based on the quality of their insurance products, their service capabilities and price quotes. Some of
our insurance products provide simple online claim and approval process and aim to lower the cost
to be borne by a customer in the event of a flight delay, a flight accident or flight or ticket cancellation.
In addition, we have extended cooperation to major online travel platforms, including the top four
online travel service providers in China, namely, Ctrip.com, Qunar.com, Alitrip.com and
Tongcheng.com, to serve customers through our various travel insurance products. As the Chinese
regulatory authorities have been encouraging direct sales by airlines themselves in recent years, we
also cooperate with major airlines, including China Eastern, Air China and Spring Airlines. We also
started to sell our products through our own platforms, including our official website and our travel
WeChat public account, Mashangfei. To fully cover customers’ needs and reach more traditional
travellers that purchase tickets offline, we also cooperate with offline tickets agents and sell our
insurance products through them. We are one of few insurance companies to successfully connect our
technological system to the system of a state-owned information technology provider that processes
air tickets bookings on domestic and overseas commercial airlines in China sold by offline tickets
agents.

Through our cooperation with our ecosystem partners, we obtained relevant customer data and
airline data with our customers’ authorization. Therefore, we are able to implement automated claim
settlement system and directly compensate our customers when flight delay occurs. We are also able
to verify whether a customer that raises a claim actually has boarded such delayed flight and thus
prevent fraud and disputes. Our technology and system enable us to provide a hassle-free solution to
our customers by processing the entire claim and settlement automatically without requiring a
customer to apply personally. For example, in the event of a delayed flight, a customer that has
purchased our Flight Delay Policy will receive the amount insured automatically through his or her
WeChat account immediately after the delayed time has met the minimum timing requirement pursuant
to the policy terms. Compared to traditional ways, we believe these features enhanced our customer

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satisfaction. Further, our data analytics enables us to improve customer experience and achieve
dynamic pricing based on flight information, customer profile and weather condition. We are also able
to enhance our risk control by accurately identifying whether the customers have boarded the delayed
flight.

In 2014, 2015, 2016 and the first quarter of 2017, we sold 2.2 million, 13.8 million, 45.6 million
and 15.6 million policies, respectively, in the travel ecosystem, recorded GWP of RMB44.3 million,
RMB322.1 million, RMB1,081.6 million and RMB331.8 million, respectively, and served 2.1 million,
9.7 million, 29.3 million and 10.9 million customers through our travel insurance products. Due to the
higher rate of handling charges and commissions and consulting fees and service charges charged by
the ecosystem partners in the travel ecosystem, the operating expense as a percentage of the net
written premiums is higher for the travel ecosystem than overall during the Track Record Period.

Our Key Products and Other

Flight Accident and Delay Policy (“ 航意航延險 ”)

We launched Flight Accident and Delay Policy in January 2015 through cooperation with Ctrip,
a leading online travel booking operator. Customers who purchase flight tickets on Ctrip’s website will
be directed to the purchase options of insurance products, including our Flight Accident and Delay
Policy and we will reimburse those customers in the event of an extended flight delay over a certain
length of time or flight accidents. The purchase option we embedded in Ctrip’s website enables our
customers to receive a travel insurance plan as part of the ticketing process and the coverage we
provide to our customers has eased their concerns of economic losses or time lost in case of extended
delays. Ctrip’s customers have the option to choose product combination to cover flight delay or
cancellation. Ctrip allocates flight delay or accident insurance products to its customers from various
providers, including us, based on the fee proposals, and service capabilities of the insurance providers.
Our customers are those who are allocated with and insured under our products. We also sell flight
delay insurance products through Alitrip.com and Tongcheng.com.

We further enlarged our product range by developing the Jijiubao (“急救保”) to cover same day
flight delay for last minute travelers. With our advanced data analytics capabilities, we are able to
decide the coverages, i.e. the length of flight delay, based on analysis using real-time flight
information. The customers are randomly assigned premiums ranging from RMB1 to RMB50 and a
corresponding coverage of up to RMB1,000. This product offers timely protections in the event that
a customer forgets to purchase the policy in advance. In addition, we offer an annual package of Flight
Delay Policy targeting frequent travellers by covering the next 12, 24 or other different times of flight
delay within a year. If customers purchase our annual package through their WeChat accounts, we can
automatically compensate them upon the occurrence of delayed flight over a certain length of time by
transferring the corresponding compensated amount to their account, which is user-friendly.

Other Products

In addition to the key products, we also offer other value-added solutions in the travel ecosystem,
such as Train Accident Policy (“火車意外險”) to cover any accidents during trips on trains through

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Alitrip.com; Hotel Cancellation Policy (“酒店取消險”) to cover cost incurred due to a cancellation of
hotel reservation by a customer through eLong.com; and Flight Ticket Change Policy (“機票退改險”)
that covers any cost incurred by a customer due to ticket cancellation or re-schedule through China
Eastern Airline. We also sell these products through insurance agents. In addition, we sell accident
insurance products through edaijia and Xiaozhu.com.

OUR CUSTOMERS AND CUSTOMER SERVICES

Our Customers

We have accumulated a large customer base. Since our inception in 2013 until March 31, 2017,
we had served approximately 543 million policyholders and the insured, and sold 8.2 billion insurance
policies. We believe that as we continue to expand and deepen our cooperation with our ecosystem
partners, and our innovative products and solutions continue to satisfy our customers, our customer
base will continue to expand.

We define our customers as the insured under our insurance policies, including customers who
choose to purchase our products, as well as customers who are allocated with our products by our
ecosystem partners For Shipping Return Policy, Merchant Performance Bond Insurance, Mobike
E-commerce Platform Liability Insurance, Flight Accident and Delay Policy, Account Safety Policy
and Train Accident Policy, customers may be allocated with our products by the relevant ecosystem
partners. For our other major products, customers generally choose to purchase our products. Some of
our ecosystem partners are also our direct customers when they purchase our insurance products.
Customers who choose to purchase our products can identify us as the insurance service provider
before purchase. Customers who are allocated with our products by our ecosystem partners can
identify us as the insurance service provider only after purchase. For customers we acquire through
cooperation with our ecosystem partners, during the underwriting process, we gain access to their
personal and transactional data that are necessary for underwriting insurance policies and use such
data in the ordinary course of our business. We can retain such data even in the event that our
cooperation with the relevant ecosystem partners is terminated.

Our products and services are popular among the young generation. As of March 31, 2017, over
60% of our individual customers were aged 20 to 35 years old. Our customers are distributed across
different geographic areas in China largely in line with the distribution of internet users in China. We
have attracted customers from China’s more affluent urban areas, and also have observed an increasing
penetration rate in smaller, non-first tier Chinese cities. For each of the years ended December 31,
2014, 2015 and 2016 and for the three months ended March 31, 2016 and 2017, our top five
policyholders combined accounted for approximately 9.4%, 9.9%, 6.4%, 9.8% and 7.4% of our GWP,
respectively. For the three months ended March 31, 2017, our top five policyholders each accounted
for 2.2%, 1.9%, 1.8%, 0.9% and 0.5% of our GWP, respectively. For the first quarter of 2017, our top
policyholders include Bohai International Trust, Yingzhongtong and Qidao Asset Management in the
consumer finance ecosystem, DJI in the lifestyle consumption ecosystem and Ctrip in the travel
ecosystem.

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During the Track Record Period, Alipay and Zhaocaibao were our Connected Persons; Ctrip,
which ceased to be our Shareholder since April 28, 2017, Yingzhongtong, whose ultimate controlling
shareholder was indirectly interested in approximately 1.45% of the total issued share capital of the
Company, and SF Express, which had no shareholding in the Company, were Independent Third
Parties.

In 2016, approximately 78% of our customers were served by our products at least twice, and on
average, each of our customers was protected by 10.3 policies during the year. Our average GWP per
customer increased from RMB4.0 in 2014 to RMB7.3 in 2015 and further to RMB9.9 in 2016 and
increased from RMB3.8 in the first quarter of 2016 to RMB4.3 in the first quarter of 2017. Since our
inception till March 31, 2017, there were approximately 18.0 million customers served by our products
from at least two ecosystems. As we cooperate with more ecosystem partners and develop our own
platforms, we believe we will be able to realize more cross-selling opportunities and increase our
customers’ life time value.

Customer Services

We transform customer service experience in traditional insurance, and we are dedicated to


providing best user experience and customer services. Leveraging our artificial intelligence
technologies, we are able to offer our customers simple and speedy customer services so as to
maximize customer satisfaction. We embed diverse innovative products into various scenarios and
directly access customers.

We have a dedicated customer service team assisted by our proprietary AI-based customer
service chatbot which is able to analyze natural-language customer questions and provide relevant and
useful responses. We recruit our customer services personnel from candidates who have good
communication skills and high customer service ethics, and we provide on-the-job training to our new
recruits. We conduct ongoing evaluations of our customer service staff and provide periodic training
to develop their skills. Each of our customer service personnel is responsible for the cases assigned
to him or her and will follow up until the case is closed or resolved to our customer’s satisfaction. We
also invite our customers to provide their feedback and ratings after the customer service calls and
conduct online satisfaction surveys. Our public relationship specialist monitors internet forums or
media to proactively discover any negative feedback or complaints about our products or services and
reach out to the customers to resolve the issues. We believe we are able to continue to maintain high
customer satisfaction rate. In addition to our in-house customer service team, we have selected
qualified third-party service providers with excellent track record and reputation to support our call
center service.

As of March 31, 2017, we had a total of 348 customer service personnel, including 34 employees
and 314 outsourced personnel. We did not experience any customer complaints or claims that
materially and adversely affected our business during the Track Record Period. Our customer
complaint rate for each of 2014, 2015, 2016 and the first quarter of 2017 was lower than 0.01% per
policy.

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SALES CHANNELS

Ecosystem Partners

We primarily embed our insurance products into the platforms of our ecosystem partners. We
market and sell our products to customers in different consumption scenarios. For example, Taobao
Marketplace, Jiyoujia, Juhuasuan and certain other platforms owned or operated by Alibaba, who work
with Ant Financial Group to select companies to provide insurance solutions that can best serve
consumer needs arising from their respective platforms. Ant Financial Group provides technology and
consulting services to us, which facilitate the integration of our solutions into platforms owned or
operated by Alibaba. As we embed our products into our ecosystem partners’ platforms, our customers
are able to purchase insurance specifically for risks related to their consumption behaviors in a very
simple manner.

Our ecosystem partners mainly include cooperative platforms, direct sales business partners and
partners connected to our open platform. Cooperative platforms mainly include platforms with which
we jointly develop insurance products to address needs of users on these platforms and/or embed our
insurance products in the consumption scenarios on these platforms as value-added features for their
users. Our cooperative platforms include, for example, Taobao Marketplace, Alipay and Ctrip. Direct
sales business partners mainly include partners to which we sell our insurance products. Such partners
are the policyholders, and the insured can be the partners themselves or their customers. Our direct
sales business partners include, for example, Xiaomi, DJI and Juhuasuan. For our cooperation with
ecosystem partners connected to our open platform, please refer to the section headed “Business—Our
Technology—Open Platform.”

Our ecosystem partners generally charge us handling charges and commissions or technical
service fee for the sale of our products through their platforms. Technical service fees are charged for
various types of services depending on the particular ecosystem partner, including, among others,
product development, account security management, system maintenance and upgrade, and software
support. Handling charges and commissions or technical service fees charged by most of our
ecosystem partners are based on fixed percentages of GWP generated from the relevant products, and
the fee rates vary by products. In the lifestyle consumption ecosystem, for certain products embedded
into the platforms of Alibaba, Ant Financial and their subsidiaries, technical service fees also take into
account the amount of claims settled. We and Ant Financial generally use this fee structure for
products that are not yet well established and have short claims settlement cycles, such as Shipping
Return Policy and Merchant Performance Bond Insurance. For more details on the technical service
fees paid to Ant Financial and its associates, please refer to the section headed “Relationship with
Connected Persons — Non-exempt Continuing Connected Transactions — Transaction with Ant
Financial Group and its Associates — Online platform cooperation agreement between Ant Financial
and/or its associates and us — Pricing Policies” in this prospectus. In addition, the fee arrangements
are usually on a short-term basis and the terms will be re-negotiated every one to two years. We
negotiate the rates of handling charges and commissions and technical service fees with our ecosystem
partners based on the service quality and capacity of our ecosystem partners. Factors taken into
consideration include GWP collected and the number and quality of the customers obtained through
the platforms of our ecosystem partners.

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The table below sets forth our handling charges and commissions (net of reinsurance expense
recovered) and technical service fees as a percentage of net written premiums by ecosystem for the
periods indicated:

For the three months ended


For the year ended December 31, March 31,

2014 2015 2016 2016 2017

(unaudited)

Lifestyle consumption . . . . . . . . . 9.0% 17.4% 17.3% 19.6% 26.6%


Consumer finance . . . . . . . . . . . . 0.4% 32.9% 20.7% 17.2% 21.0%
Health . . . . . . . . . . . . . . . . . . . . . — 6.2% 19.9% 8.0% 20.0%
Auto . . . . . . . . . . . . . . . . . . . . . . — — 125.8% 18.6% 118.3%
Travel . . . . . . . . . . . . . . . . . . . . . 97.7% 88.1% 81.1% 77.8% 80.1%
Others . . . . . . . . . . . . . . . . . . . . . (8.5)% 28.1% 32.8% 25.9% 37.1%
Overall . . . . . . . . . . . . . . . . . . . . 13.8% 29.5% 39.0% 39.0% 43.6%

In addition, we set up our official online store on major online sales channels, such as Tmall, Ant
Financial Group’s insurance platform, Weidian, and others. Our Personal Clinic Policy was the top
seller in the non-auto insurance category on Ant Financial Group’s insurance platform in 2016. For
certain of our insurance products, we further expand our sales through cooperation with offline
channels. For example, we work with offline travel agencies to sell our Flight Delay Policy and with
offline consumer electronics shopping centers to sell our General Screen Crack Policy.

In each of our ecosystems, and for each of our key product categories, we rely on a few
ecosystem partners to generate a significant portion of our total GWP. In 2014, 2015, 2016 and the
first quarter of 2017, GWP generated from or through the platforms of our ecosystem partners
accounted for 100.0%, 97.7%, 86.2% and 74.6% of our total GWP in the respective period and GWP
generated from or through the platforms of our top five ecosystem partner groups (in terms of GWP
contribution) accounted for 98.9%, 95.3%, 80.8% and 66.4% of our total GWP in the respective
period. See the section headed “Risk Factors — We depend on our cooperation with our ecosystem
partners and other participants in the ecosystems. Our business may be affected if such partners do not
continue to maintain their relationship with us or by the operational failure of third-party ecosystem
partners.”

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For a variety of our insurance products, we cooperate with our ecosystem partners to embed these
insurance products into their platforms and sell our policies to users of such platforms. Our ecosystem
partners generally charge us handling charges and commissions or technical service fee for the sale
of our products through their platforms. Technical service fees are charged for various types of
services depending on the particular ecosystem partner, including, among others, product
development, account security management, system maintenance and upgrade, and software support.
The table below sets forth the material terms, including pricing arrangements for such technical
service fees and handling charges and commissions, of our agreements with the top five ecosystem
partner groups, which aggregate the ecosystem partners and their respective subsidiaries, in terms of
the GWP generated through our cooperation with the respective ecosystem partner groups for each of
the years ended December 31, 2014, 2015 and 2016 or for the three months ended March 31, 2017 but
excluding those whose GWP contribution was less than 1% of the total GWP for the same periods:

Ecosystem
Partner Group Pricing mechanism for fees charged (1) Term and renewal

Alibaba, Ant Financial We pay technical service fees to Ant The current online platform agreements
and their Financial (or its subsidiaries) (i) for the entered into with Ant Financial are for the
subsidiaries (2) technology and consulting services provided provision of insurance products to Alibaba’s
by Ant Financial (or its subsidiaries) on its various platforms. These agreements contain
platforms or (ii) for the technology and specific pricing and other terms and
consulting services provided by Ant Financial generally have terms of one or two years.
(or its subsidiaries) on the platforms of
Alibaba or its subsidiaries to facilitate the We also entered into an online platform
integration of our products and solutions into cooperation framework agreement with Ant
such platforms. Financial for a term of three years, which
will be effective upon the Listing Date. This
Technical service fees are charged based on a framework agreement is in parallel with the
fixed percentage of GWP generated through current agreements with Ant Financial. The
the platforms of Alibaba, Ant Financial and framework agreement does not set out the
their subsidiaries, with fee rates varying by specific pricing terms and does not contain a
products. In the lifestyle consumption provision on renewal.
ecosystem, for certain products embedded
into the platforms of Alibaba, Ant Financial
and their subsidiaries, technical service fees
also take into account the amount of claims
settled.

Ctrip and its Handling charges and commissions and The term of the agreements is one year or 14
subsidiaries technical service fees are charged based on a months with effective period from July 1,
fixed percentage of GWP with fee rates 2017 to June 20, 2018 or from May 1, 2017
varying by products to June 30, 2018, and can be automatically
renewed either every year or once for an
additional term of one year.

Xiaoying and its Technical service fees are charged based on a The term of our strategic agreement with
subsidiaries fixed percentage of GWP with fee rates Xiaoying is one year with effective period
varying by products from March 31, 2016. The agreement can be
automatically renewed every year and was
renewed in March 2017.

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Ecosystem
Partner Group Pricing mechanism for fees charged (1) Term and renewal

Fenqile N/A (3) The terms of the agreements are two or three
years, each expiring in 2019.

Xiaomi Handling charges and commissions are The term of our cooperation agreement is
charged based on a fixed percentage of GWP three years with effective period from May 1,
with fee rates varying by products 2016 to April 30, 2019, and can be
automatically renewed before expiration for
one year subject to two automatic renewals
at maximum.

iyunbao Technical service fees are charged based on a The term of the agreement is one year
fixed percentage of GWP with fee rates effective from May 10, 2016. The agreement
varying by products can be automatically renewed every year
subject to two automatic renewals at
maximum and was renewed in May 2017.

Notes:

(1) The fee arrangements are usually on a short-term basis and the terms will be re-negotiated every one to two years.
(2) Alibaba works with Ant Financial Group to select companies to provide insurance solutions that can best serve consumer
needs arising from their respective platforms. According to the agreements we entered into with Ant Financial, Ant
Financial Group provides technology and consulting services to us, which facilitate the integration of our solutions into
the platforms of Alibaba, Ant Financal and their subsidiaries, including Taobao Marketplace (淘寶), Juhuasuan (聚划算),
Jiyoujia (極有家), Tmall (天貓), Zhaocaibao (招財寶) and Alipay (支付寶).
(3) Fenqile did not charge us handling charges and commissions or technical service fees during the Track Record Period.

For customers we acquire through cooperation with our top ecosystem partner groups above,
during the underwriting process, we gain access to their personal and transactional data that are
necessary for underwriting insurance policies and use such data in the ordinary course of our business.
There are no material terms regarding the use of customer data in our contracts with the top ecosystem
partner groups above. We also collect anonymized, non-confidential user behaviors and patterns and
source data from third-party data providers, which are not linked to specific individual users. We can
retain such data even in the event that our cooperation with the relevant ecosystem partner groups is
terminated.

The table below sets forth a breakdown of the GWP generated from or through the platforms of
the ecosystem partner groups mentioned above, and the total fees (referring to handling charges and
commissions and technical service fees, as applicable) charged by such ecosystem partner groups.

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With respect to GWP, the respective percentage refers to the percentage of the total GWP for the
periods indicated; with respect to the total fees charged, the respective percentage refers to total fees
charged as a percentage of the GWP generated from or through the respective ecosystem partner
group.

Ecosystem Partner
For the Three
Group (1) For the Year Ended December 31,
Months Ended
2014 2015 2016 March 31, 2017
RMB % RMB % RMB % RMB %

(in thousands, except percentages)

Alibaba, Ant Financial and


their subsidiaries
GWP . . . . . . . . . . . . . . . 733,786 92.4 1,708,420 74.8 1,795,992 52.7 431,195 41.8
Total fees . . . . . . . . . . . 66,964 9.1 333,432 19.5 437,735 24.4 94,332 21.9
Ctrip and its subsidiaries
GWP . . . . . . . . . . . . . . . 44,313 5.6 297,935 13.0 702,413 20.6 178,785 17.4
Total fees . . . . . . . . . . . . 42,925 96.9 260,751 87.5 486,239 69.2 142,416 79.7
Xiaoying and its
subsidiaries
GWP . . . . . . . . . . . . . . . 1,147 0.1 137,496 6.0 190,454 5.6 52,759 5.1
Total fees . . . . . . . . . . . . — — 45,689 33.2 20,165 10.6 14,378 27.3
Fenqile
GWP . . . . . . . . . . . . . . . — — — — 29,478 0.9 21,144 2.1
Total fees . . . . . . . . . . . . — — — — — — — —
Xiaomi
GWP . . . . . . . . . . . . . . . 2,120 0.3 30,791 1.3 37,593 1.1 12,258 1.2
Total Fees . . . . . . . . . . . — — — — 2,164 5.8 3,301 26.9
iyunbao
GWP . . . . . . . . . . . . . . . — — — — 64,971 1.9 6,289 0.6
Total fees . . . . . . . . . . . . — — — — 21,837 33.6 2,016 32.1

Online travel agencies in China generally charge high rates of handling charges and commissions
and technical service fees, primarily because (i) travel related insurance products tend to be
standardized and insurance providers mainly rely on price competition; and (ii) travel-related
insurance products on average have a low loss ratio.

Some of our ecosystem partners are also our shareholders or related parties. In 2014, 2015 and
2016 and the three months ended March 31, 2017, our GWP generated from or through our
shareholders and related parties accounted for 98.0%, 87.9%, 73.4% and 59.3% of our total GWP,
respectively. We expect that the GWP generated from or through our shareholders and related parties
will continue to account for a large amount of our total GWP going forward. However, our cooperative
arrangements with our shareholders and related parties in the future may be subject to certain risks.
See “Risk Factors — Risks Relating to Our Business — We historically derived a majority of our total
income through partnering with our shareholders and related parties, and the synergy value and

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cross-selling effect from these partnerships may decrease in the future. Some of our shareholders and
related parties offer products competing with ours.” For further details on connected transactions, see
section headed “Relationship with Connected Persons” and for further details on related party
transactions, see section headed “Appendix I Accountant’s Report”. Ctrip ceased to be a shareholder
of our Company in April 2017 as Qingdao Huilijun Trading Company Limited (青島惠麗君貿易有限
公司) acquired shares from Beijing Ctrip International Travel Agency Limited(北京攜程國際旅行社有
限公司) in a private transfer completed on April 28, 2017. The transaction between the parties was a
private, confidential transaction. Ctrip, though a U.S. listed company, was not required to publicly
disclose the amount of the proceeds it gained from the sale of its stake in the Company at the time
of completion, and therefore considers such information to remain confidential. As such, Ctrip has
declined to provide this information for disclosure in this document. The transaction was for Ctrip’s
own business purpose and financial planning, and has not affected our cooperation with Ctrip. We
entered into cooperation agreement with Ctrip on an arms’ length basis and expect to renew the
agreement on the same basis subject to the market conditions. Our GWP generated from or through
Ctrip’s platform increased by 20.6% in the six months ended June 30, 2017 as compared with the same
period of 2016.

Insurance Agents

In addition to our ecosystem partners’ platforms, we sell certain insurance products through
insurance agents. For example, we currently sell a large portion of our health insurance products
through insurance agents. With the significant growth of our health insurance products during the
Track Record Period, insurance agents have become an increasingly important sales channel for the
distribution of our policies. We generally pay insurance agents handling charges and commissions in
proportion to the GWP generated.

In 2014, 2015 and 2016 and the three months ended March 31, 2017, our GWP generated through
insurance agents (other than Ctrip Insurance Agency Co., Ltd., who is also one of our ecosystem
partners) accounted for 0.0%, 2.1%, 13.2% and 23.8% of our total GWP, respectively. The handling
charges and commissions of the products sold through insurance agents (other than Ctrip Insurance
Agency Co., Ltd.) in 2014, 2015, 2016 and the three months ended March 31, 2017 represented 0.0%,
0.6%, 4.7% and 9.7% of our total net written premiums, respectively.

Our Proprietary Platforms

In addition to distributing through our ecosystem partners’ platforms or other third party
channels, we develop our own platforms including our websites, our mobile application, our WeChat
public accounts, our QQ public account and our Tmall flagship store to sell our insurance products.
For example, we have developed Generic Buyer Version of Shipping Return Policy which our
customers can purchase on our own platform to cover return shipping fee on various e-commerce
platforms. We also set up our official WeChat public accounts to further expand our reach to
customers. For example, we sell Jijiubao through our WeChat mobile application, which primarily
targets business travelers that have frequent business travel plans with last minute needs for flight
delay protection.

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We also direct users to our platforms for better services. By furnishing an engaging user
experience, we believe that our direct sales can increase user loyalty and stickiness. Our customers can
conveniently purchase a wide range of policies when they surf on our websites and mobile application,
through which we realize cross-selling and increase our customer’s life time value. In addition, with
the development and continuous upgrade of our proprietary platforms, we believe that we will be able
to directly serve more customers and sell more products on our platforms to control our costs.

In 2014, 2015 and 2016 and the three months ended March 31, 2017, our GWP generated through
our proprietary platforms accounted for 0.0%, 0.2%, 0.5% and 1.6% of our total GWP, respectively,
and our net written premiums generated through our proprietary platforms accounted for 0.0%, 0.1%,
0.5% and 1.4% of our total net written premiums, respectively.

Other Platforms

We also distribute our products through other platforms, such as Alipay Wallet Service Counter
(支付寶錢包服務窗) and WeChat Mini Programs (微信小程序).

INSURANCE VALUE CHAIN

Product Management System

We adopt an effective product management system. Each product manager takes ownership of a
team, which consists of experts specialized in product design, application development, engineering
and operations. Each team works closely together with high efficiency and responds to the market
quickly by frequently communicating with ecosystem partners and adopting a customer-centric
approach. We staff employees performing finance, legal, human resources and other administrative
functions in each department to support their work and more efficiently respond to internal demands.
Through the flat structure, we are able to maintain transparency and accountability throughout the
organization.

Product Development

Once our product managers identify unaddressed market needs or uncover new demand, each
team begins to develop and test the products. Our product review committee, which consists of the
senior management with risk control expertise and CIRC regulatory experience, will evaluate the new
products before the official launch. The product development process typically takes less than a
month, and can be as short as several days in the case of embedding an existing product into a new
partner’s system or upgrading an existing product. We are able to achieve economies of scale with the
increased number of products and income supported by small teams led by product managers.

Marketing and Distribution

Unlike traditional insurance companies, we primarily market and sell our ecosystem-oriented
products through our ecosystem partners’ platforms. We are also able to directly reach customers who

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have registered with our proprietary platforms through our websites, mobile application, WeChat
public accounts and QQ public account. As of March 31, 2017, there were more than 3.6 million users
registered with our proprietary platforms. We also distribute our products through insurance agents.

Pricing and Underwriting

Pricing for our insurance products is based on generally accepted actuarial principles as well as
relevant CIRC regulations. We principally take into account the following factors in pricing our
insurance products: applicable regulatory requirements, severity and frequency of loss, expenses
relating to marketing and promotion, claim settlement expenses, target margins and pricing of similar
products in the market.

We strive to control our risk exposure and achieve profitability for our insurance products
through effective pricing. We take into consideration of actuarial rates, as well as our estimated
expenses associated with distribution, marketing and claim settlement, to determine our “breakeven”
rates, and add in a suitable margin for profit. Formulation and material modification of policy terms
and premium rates of our insurance products do not require prior CIRC approval, but are required to
be filed with the CIRC within 10 business days after the launch of such products.

With our big data capabilities, we analyze extensive user data originating from our large and
expanding customer base and third-party data providers to enhance our pricing accuracy. Such data
include personal and transactional data we gain access to for the purpose of underwriting insurance
policies, as well as anonymized user behaviors and patterns we collect during the ordinary course of
business and source from third-party data providers. Our cloud-based platform enables us to achieve
dynamic and customized pricing.

Claim Settlement

We have established a centralized claim settlement management system to provide automated


online claim settlement for certain of our products. We cooperate with our ecosystem partners or data
providers in the claim settlement process to ensure accurate and efficient claim settlement process. For
example, for our Flight Delay Policy, we actively track flight data and passenger information and
complete the reimbursement automatically.

Reinsurance

We reinsure certain portions of the insurance risks we underwrite to reduce risk exposure, protect
capital resources and maintain stability in operations. We currently do not reinsure products with short
policy terms, smaller coverage amount and high purchase frequency, such as Shipping Return Policy
and Flight Delay Policy. We reinsure products with relatively larger coverage amount and longer
terms, such as certain products in the health ecosystem. Most of our reinsurance was for our Personal
Clinic Policy during the Track Record Period. We also use reinsurance to improve our underwriting
capacity and limit our exposure to potential extraordinary losses. We determine our retention amount
and our cession ratio based on the relevant insurance laws and regulations in the PRC, the
development strategies of our property and casualty insurance business, our solvency margin, the
characteristics of different insurance products, as well as the needs of our business operations.

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According to Article 102 of the PRC Insurance Law, retained premiums of a property and casualty
insurance company for the current year may not exceed four times the sum of its paid-in capital and
the capital reserve. According to Article 103 of the PRC Insurance Law, the liability of an insurance
company for the maximum amount of loss that may be caused by a single insured event may not be
more than 10% of the sum of paid-in capital and the capital reserve. Any part exceeding the 10% limit
must be reinsured. According to Article 10 of the Provisions on the Administration of Reinsurance
Business promulgated by the CIRC, an insurance company must determine its total retained premiums
and its retained liability for each risk unit for the current year. Reinsurance must be obtained for the
excess.

We have established internal reinsurance policy with detailed implementation rules to ensure
compliance with relevant laws and regulations and manage relevant risks. In general, we believe
reinsurance is necessary under the following three circumstances : (i) according to our internal policy
and the relevant regulatory requirements, for each product policy, we set an estimated tolerance
amount with respect to the maximum risks associated with such policy that we could be able to
manage. We would need reinsurance to allocate and control our risks in the event that the actual risks
of the product policy exceed such tolerance risks; (ii) during the development stage of a product, we
may lack sufficient data or experience in assessing the relevant risks associated with such product and
thus we expect to leverage on experience in pricing and claim settlement from reinsurers to mitigate
our risks; and (iii) for product policies that usually involve excessive risks, we expect to reduce the
risks and avoid extreme risk volatility through reinsurance. We gain knowledge from our reinsurers
about various types of risks and the basis of rating the risks in developing our products, and we
effectively reduce our insurance risks by distributing some risks among reinsurers in these situations.
We have adopted cautious strategies for selecting our reinsurers and adhering to the requirements set
forth in the Circular on Issues Concerning Security of Reinsurance Business. We select our reinsurers
carefully, based on their financial strength, service, terms of coverage, efficiency of claims settlement
and price. Our reinsurers must have obtained high ratings from reputable third party rating agencies
for their financial conditions and possessed required licenses and permits.

OUR TECHNOLOGY

We believe our proprietary infrastructure and technologies are critical to our success. We have
made significant investments in developing a proprietary, scalable cloud-based core system which is
one of our competitive advantages.

We are one of the few insurance companies in China that operate their core insurance systems
fully on cloud-based platforms. We further developed open platforms in order to connect with the
growing number of ecosystem partners. We also apply big data analytics and artificial intelligence in
marketing, underwriting, pricing, claim processing and settlement. Furthermore, we develop our
technology solution business which offers data, technology and model solutions to our ecosystem
partners and other players in the financial industry.

Wujieshan, our Cloud-based Core System

We have developed a secure, efficient and cost-effective cloud-based core system, Wujieshan, to
operate our insurance business. Cloud-based technology allows us to process large amount of
complicated data in-house, which significantly reduces cost and improves operation efficiency.

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Our proprietary Wujieshan is highly secured. We back up our data at different locations by
different cloud server providers simultaneously. Our proprietary security system analyzes and predicts
malicious attack. The response time of our cloud system is shortened to within five seconds, resulting
in enhanced responsiveness to any challenges or attacks.

Our Wujieshan system enables efficient automatic operation and maintenance capabilities. We
are able to achieve up to 500 product releases each week without interrupting the servers, and the
policy processing speed can be up to 13,000 policies per second. Our system can generate a response
in ten milliseconds with feedback provided within five seconds. We are capable of completing
reconciliation on a daily basis and we have never lost a single policy as of the Latest Practicable Date.
Therefore, during the peak hours, such as the Double 11 Shopping Festival in 2016 when massive
orders came from customers simultaneously, our cloud-based system processed 200 million policies
within one week.

Furthermore, we power our Wujieshan system by our micro-service architecture, DevOps


platform and monitoring platform. By means of these architecture and platforms, the development
cycle would not exceed two weeks. In addition, we are capable of releasing new product or feature
to our production environment within one minute. The notification about any exception happened in
production environment would be received within ten seconds.

Our artificial intelligence includes the application of technologies related to image recognition
and NLP. We apply image recognition in our Phone Screen Crack Policy and NLP in the chatbot
program for our Personal Clinic Policy. We have obtained and are in the process of obtaining
intellectual property rights for some of our technologies. See “— Intellectual Property.” As of March
31, 2017, our Group had two patents registered with the State Intellectual Property Office of China.
We also had eight patent applications, all of which relate to various aspects of our Wujieshan system.

Our technology platform incorporates licensed third-party software, which we are authorized to
use under strict compliance with the relevant licensing requirements. We utilize a number of
open-source software frameworks of the Apache series in our IT infrastructure, including Hadoop,
Spark, Zookeeper and others, which support our big-data processing, management and cloud
computing. See the section headed “Risk Factors — Risks Related to Our Business — Our inability
to use software licensed from third parties, including open source software, could negatively affect our
ability to sell our solutions and subject us to possible litigation” in this prospectus.

Open Platform

Our open platform enables us to embed insurance products to various ecosystems through
different technologies and mechanisms, including standard APIs, embedded page component, and
software development kit embedded into our operating system. Through our open platform, we are
able to cooperate with more ecosystem partners in an efficient manner. In addition to serving our
insurance related business, our open platform also provides data related risk management services to
our ecosystem partners. We plan to leverage our open platform and advanced technology underlying
this platform to help more customers enjoy comprehensive insurance protections in various aspect of
their lives. For example, Xiaozhu.com, a short term apartment sharing website in China, utilizes our
open platform to offer our comprehensive homeowners insurance and occupation accident insurance
to the homeowners and tenants on its platform.

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Big Data Analytics

Data is one of the most important assets for the insurance companies. Throughout the insurance
value chain, insurance companies face decisions that rely on the analysis of financial, actuarial,
claims, risk, consumer, producer and other types of data. New analytical methods allow insurance
companies to process these huge amounts of so far untapped data. Predictive and statistical modelling
allows insurance companies to predict what may happen in the future by measuring and understanding
past behaviors and patterns.

Through our business in various ecosystems, we have accumulated big data from our growing
customer base. Given our ecosystem-oriented innovation and scenario-based settings, we have access
to valuable data of customers’ behaviors and consumption patterns in their everyday lives. During the
underwriting process, we gain access to personal and transactional data of our customers that are
necessary for underwriting insurance policies and use such data in the ordinary course of our business.
We also collect anonymized, non-confidential user behaviors and patterns and source data from
third-party data providers, which are not linked to specific individual users. Leveraging on the unique
and large amount of data we have gathered, combined with our internally developed machine learning
engine and analytics models, we are able to efficiently and accurately collect and analyze large amount
of user data to insurance related profiles.

On the customer end, we utilize our big data capability on behavior predictions, customer
profiling, targeted marketing and user experience optimization. For example, we are able to
recommend our insurance products in the consumption scenario based on the customer’s pattern to
accurately address their pain points to improve their overall experience. We also apply our data
analytic in our product design process, including product iteration, dynamic pricing, real-time fraud
detection, claim settlement and customer services. Our sophisticated data insights and data analytics
capabilities have driven our rapid growth and improved our operational efficiency. The value of our
rich data increases exponentially with our strong emphasis in data analytics. Our accurate and
comprehensive user profiling enables us to continuously enhance user experience, improve our ability
to attract and retain customers and maximize our profitability.

Artificial Intelligence/Machine Learning

The insurance industry is ripe for further automation as it revolves primarily around analysis and
processing of information. The availability of advanced artificial intelligence technology brings
significant value to the insurance companies. We apply artificial intelligence in multiple areas, such
as identity verification, image recognition, model iteration and customer service, to improve our risk
management, operating efficiencies and customer satisfaction.

For example, we utilize machine learning and neuro-linguistic programming to develop


automated customer service chatbot, which significantly improved customer experience and reduced
our insurance operating expenses. Most significantly, we integrated our artificial intelligence
capabilities extensively to support risk management. For example, we are able to achieve automation
in real-time risk control and dynamic underwriting system to achieve more accurate pricing
specifically addresses risks we face. Our user profiling through graph mining enables us to provide
accurate predictive recommendation to our customers. We are able to build a customer white list based
on the analysis. Our advanced image recognition technology enables us to design fast and effective
anti-fraud measures, which provide us with an unique competitive advantage in optimizing our claims
process for our innovative products such as Phone Screen Crack Policy. Our technology allows us to

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verify that the phone in the photos sent by the users is the same phone to be insured, and increases
the accuracy of the check for the screen of the phone. Our real-time risk management system enabled
by artificial intelligence technology makes it possible for us to obtain holistic understanding of
customers and address fraud and default risks throughout a product lifecycle, from product design,
underwriting, monitoring and claim settlement.

Blockchain

Blockchain is a distributed ledger technology used to store static records and/or dynamic
transaction data distributed across a network of synchronized and replicated databases. It empowers
trust between parties without the use of a central intermediary, removing frictional costs and
inefficiency. From a technical perspective, blockchain is a distributed database that maintains a
continuously growing list of ordered records called blocks. Blockchain can be applied to identity
management, fraud detection, and peer-to-peer risk management, which can be valuable for our
products in the health ecosystem.

We independently developed our blockchain system, namely Ann-chain and Ann-router.


Ann-chain is a blockchain protocol implementation which is intended as a foundation for developing
blockchain applications and solutions. Ann-router is our blockchain network component which is
intended to link isomorphic and heterogeneous blockchains.

We have applied the blockchain technology and developed Ti-Capsule, which is a peer-to-peer
and secured data storage system. The documents stored in Ti-Capsule are secured and cannot be
modified. Data is secured even if one of the data center is under attack. Sensitive information such
as customer identity, asset proof, health information and e-contracts can be securely stored with
Ti-Capsule, which is valuable to financial institutions, especially insurance companies.

We are actively involved in the development of blockchain in China and are one of the founding
members of the Shanghai Blockchain Enterprise Development Promotion Alliance, which include
Xiaoying, Locket and Bestpay. We also participated in drafting the industry standard in collaboration
with China Electronics Standardization Institute.

Our Research and Development Team

We have a team of experienced engineers dedicated to our research and development. As of


March 31, 2017, our research and development staff consisted of approximately 860 engineers and
technicians, representing over 50.6% of our total employees. As of March 31, 2017, among our
research and development staff, approximately 63.5% are responsible for system connections with our
ecosystem partners, system maintenance of such ecosystems and product development, approximately
7.3% specialize in big data analytics, approximately 5.5% are in charge of the development and
maintenance of our Wujieshan platform, approximately 1.5% focus on blockchain related technology,
approximately 4.5% specialize in artificial intelligence and machine learning and the remaining 17.7%
are general support. In the future, as we emphasize more on our technology solutions business, we are
committed to investing further in our research and development capabilities and expanding our
research and development team to support our business development and maintain our technological
advantages. Our engineers are based in our Shanghai or Hangzhou office. We recruit most of our
engineers from prestigious universities in China and hire experienced laterals from well-established
internet and software companies. We compete aggressively for engineering talent to help us address
challenges and maintain our technological edges. In the years ended December 31, 2014, 2015, 2016

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and in the three months ended March 31, 2016 and 2017, our research and development investments
were RMB22.4 million, RMB63.9 million, RMB214.4 million, RMB34.5 million and RMB91.7
million, respectively, representing 2.8%, 2.8%, 6.3%, 5.7% and 8.9% of our GWP in these periods,
respectively.

OUR TECHNOLOGY SOLUTIONS BUSINESS

In July 2016, we established a wholly-owned subsidiary in China, ZhongAn Technology, which


focuses on the research and development of cutting-edge financial technologies. In addition to
supporting our own research and development efforts, ZhongAn Technology aims to provide
technology solutions to our business partners and other industry participants. By integrating artificial
intelligence, blockchain, cloud computing and big data capabilities, we envision our technology
solutions to play an important role in further promoting the information system in the insurance and
financial services industries. We strive to make ZhongAn Technology a leader in applying blockchain
and artificial intelligence technologies and the incubator for other advanced technologies in the future.

Through ZhongAn Technology, we currently develop and offer three series of technology
services: the S series of insurance and financial applications, the X series of intelligent data services
and T series of blockchain services. As of March 31, 2017, we had developed two S series products,
seven X series products and three T series products. We aim to market our technology solutions to our
corporate customers in the insurance and financial services industries. As of the Latest Practicable
Date, ZhongAn Technology had entered into 27 technical service agreements in connection with the
provision of services such as big data, risk management, online platform infrastructure and software
engineering. ZhongAn Technology did not record any revenues during the Track Record Period, and
began to generate revenue in the second quarter of 2017. Revenue generated by ZhongAn Technology
in the six months ended June 30, 2017 amounted to RMB2.9 million.

S Series

Our S series products include cloud-based applications designed for the insurance and financial
services industries, aiming to speed up the digitalization of traditional insurance and financial
services. We mainly develop three types of S series solutions for insurance and financial industries:

• E-commerce platforms. We have been developing new technologies to establish


e-commerce platforms for our clients. They allow traditional insurance companies and
agents to quickly build up their online sales channels, including official homepages, mobile
apps, e-commerce platforms, WeChat platforms and others. Such platforms can also be
connected to and integrated with other e-commerce platforms in the relevant online
ecosystems. We have launched e-commerce platform development services in the first
quarter of 2017.

• Insurance core systems. We have been developing cloud-based core systems for insurance
providers.

• Finance core systems. We have been developing cloud-based core systems for financial
service providers. We entered into an agreement with our cloud-based cooperative partner
in the second quarter of 2017.

The value of S series contracts ranges from RMB1 milllion to RMB3 million.

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X Series

Our X series products include various data services backed by our artificial intelligence
technology. We offer customized solutions to meet the unique needs of our customers by providing
data services through API connection to our clients, which are mainly internet finance platforms. We
charge a fee ranging from RMB0.3 to RMB6.0 for each occurrence of API usage. The followings are
some examples of X series services we have launched or plan to launch in the near future:

• X-Model. X-Model helps our clients conduct data analysis and develop customized risk
management models. We launched X-Model in March 2017.

• X-Decision. X-Decision helps our clients make transactional decisions, such as whether to
approve a loan application, based on data analysis provided by X-Data and X-Model. We
launched X-Decision in May 2017.

• X-Man. X-Man helps our clients analyze their own customer data to create customer
profiles. We are currently developing client relationships for X-Man.

• Smart Customer Service. Our customer service chatbot programs analyze customer
questions to provide relevant and useful responses using NLP. Since the launch of the
customer service program for our Personal Clinic Policy in November 2016, it has handled
over 40,000 service incidents per week, reducing our customer service staff cost.

• Facial Recognition. Our facial recognition service helps us and our clients achieve remote
identity verification, which enhances security in online financial transactions.

In addition, we also offer X-Data, X-Opinion and X-Security, and we develop platform-level X
series products including intelligent development tools and intelligent infrastructure services, such as
X-Flow, X-Antifraud and X-Custmade. As of the Latest Practicable Date, we had more than 150
customers for our X series products.

T Series

Our principal T series product is Anlink, our proprietary internet security platform based on
blockchain, artificial intelligence and other technologies. Anlink can be deployed on private or public
cloud, and includes a suite of secure services such as identity verification, digital assets circulation,
clearing, data storage and copyright protection. We launched Anlink with our cooperative partners,
and promoted Anlink externally in November 2016. We began providing service on our Anlink website
in March 2017 and commercialized Anlink in May 2017. Our potential partners in the development of
blockchain technology include major stock and insurance exchanges, insurance companies, banks, as
well as leading companies in other industries.

• Ti-Capsule. Ti-Capsule is used to store the important or sensitive information such as EMR
or privacy information. All documents stored in Ti-Capsule are tamper-resistant and also do
not drop-out in any situation. We launched Ti-Capsule in August 2016.

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• Ti-Sun. Ti-Sun provides an unique and secure digital identity for any users in our
ecosystem. A smart identity contains all digitalized attributes and assets belonging to the
corresponding user which helps us provide services such as know-your-client and
anti-money laundering. We launched Ti-Sun in December 2016.

• Ti-GlassHouse. Ti-GlassHouse is Anlink ecosystem’s financial infrastructure. It provides


the ability to digitalize off-chain assets such as points or insurance products to blockchain.
All on-chain digital assets could be transacted in real time and support supervision
naturally. We launched Ti-GlassHouse in May 2017.

• Ti-Packet. Ti-Packet is an online electronic blockchain-based signing system. It allows


signing parties to enter an agreement by certified electronic signatures as well as
authorization by blockchain, which ensures the agreement to be non-amendable so as to
protect the interests of the signing parties. We launched Ti-Packet in May 2017.

As of the Latest Practicable Date, we have entered into one agreement in connection with our
provision of the Anlink-based technological services.

RISK MANAGEMENT

Our Risk Management Framework

Management of risk exposure is fundamental to our operations. We have established a


comprehensive, enterprise-wide and technology-driven risk management framework to manage risks
across our operations. We apply our big data analytics capability and machine learning technology to
assist our risk management efforts. The three pillars of our risk management framework include (i)
quantitative capital requirements, such as the management of insurance risk, market risk, credit risk
and liquidity risk, (ii) qualitative risk management requirements, such as the management of
operational risk, strategic risk, reputation risk and liquidity risk, and (iii) market discipline.

The Board of Directors assumes the ultimate responsibility for our risk management, internal
control and compliance. Our risk management activities are centrally undertaken and monitored by a
risk management committee under our Board, and supplemented by the legal and compliance
department, internal audit department and other business departments. The risk management
committee is responsible for identifying and reviewing the major areas of risk across the Company,
and for approving, and ensuring compliance with key financial and operational risk management
policies. Our chief risk officer who has over 18 years of legal and risk management experience in
financial institutions, oversees the risk management of the Company and participates in the meetings
of the risk management committee. We also set up a risk management department with expertise in
finance, investment, legal and regulatory, actuarial and internal audit to oversee the daily risk
management activities of the Company.

In addition to overall risk management, we also emphasize our risk management throughout the
insurance value chain. For example, we closely monitor the credit risks when developing our credit
guarantee insurance. Our product managers in each business department also contributed to our risk
management efforts in their daily practices. We set up key risk indicators for each business department
to monitor our daily operations. Prompt reporting to the risk management department is required when
key risk indicators are triggered.

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The organizational structure of our risk management system includes: Board of Directors, risk
management committee, senior management, risk management department, legal and compliance
department, finance department, actuarial department, operation management center, information and
technology department, the various business departments, internal control department and other
related departments.

Board of Directors

The Board of Directors of our Company is the highest authority in terms of risk management. It
monitors the effectiveness of our management’s risk management, and takes the ultimate
responsibility in terms of the effectiveness of risk management. The principal risk management
responsibilities of the Board of Directors include:

• Provide guidance on establishment and improvement of risk management system of the


Company, review and approve annual risk management work schedule and target, and
supervise the management team over solvency risk control;

• Review and approve risk management policies;

• Review and approve the formulation and adjustment of the risk management structure and
responsibility;

• Review and approve the strategy of risk management, including the overall target, risk
preference, risk tolerance, risk management policy, choice of risk management tool and
resource allocation scheme for risk management;

• Review other risk assessment reports that need to be disclosed to the public; and

• Other important matters that need approval by the Board of Directors.

Risk Management Committee

The risk management committee of the Board is responsible for understanding all major risks
involved in the Company’s operations and their management and is also responsible for supervising
the effectiveness of our risk management system. The risk management committee has the following
principal functions:

• Review overall objectives, fundamental policies and operational rules for risk management,
and make suggestions and recommendations to the Board;

• Prepare annual risk management plan and working targets;

• Review setup of risk management systems as well as each organization’s duties and
responsibilities, and make suggestions and recommendations to the Board;

• Review risk assessment relating to significant decision-making and proposed measures to


address significant risks, and make suggestions and recommendations to the Board;

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• Review annual risk assessment reports, risk management reports on specific issues and key
risk analysis reports and make suggestions and recommendations to the Board; and

• Coordinate and oversee the risk management practice in each business department.

Senior Managements

Our senior managements execute resolutions relating to risk management approved by the Board
of Directors and the risk management committee and manage the risks involved in our daily
operations. The principal functions include:

• Formulate and execute the policy and schedule of risk management according to the overall
target and risk preference approved by the Board of Directors;

• Coordinate with risk management department and other departments to review the risk
management system and policy and accomplish the necessary updates;

• Establish and evaluate solvency risk management organizational structure and adjustment
scheme; senior management can review quarterly and annual risk assessment reports on
senior management general meetings and can review various risk management regulations;

• Lead and supervise risk management activities of all functional departments to ensure the
establishment and operation of risk management process;

• Review risk management development strategy, including risk preference and tolerance,
limit of various risks, principal solutions, choice of risk management tool and resource
allocation scheme;

• Report to the risk management committee regarding solvency risk level and risk
management condition annually;

• Review quarterly risk assessment report, discuss major risk solution scheme; and

• Coordinate the establishment of risk execution information system and cultivate risk
management culture.

Risk Management Department

The risk management department is in charge of the daily risk management of the Company and
coordination among the business departments and report to the Board. The risk management
department has the following principal functions:

• Establish and maintain solvency management system; facilitate formulation of various risk
management regulations; set responsibility, methods, content, measurement, monitoring
and report arrangement of various risk management; review and update the regulations at
least once a year and keep the records;

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• Establish the strategy of risk management, including the overall target, risk preference, risk
tolerance, risk management policy, choice of risk management tools and resource allocation
schemes for risk management;

• Take lead in preparing risk management report; carry out quarterly and annual risk
assessment and measurement; track the latest risk allocation and risk management system
operation conditions and submit the relevant reports to the Board of Directors or senior
management;

• Take lead in preparing solvency risk report and submitting it to senior management and
CIRC, and submit the same on the second and fourth quarter to the risk management
committee and the Board of Directors to consider and approve;

• Assist to establish and improve the solutions and emergency mechanisms for major risk
accidents, major solvency accidents and major operational management accidents;
summarize significant discrepancy of solvency risk systems and other relevant matters and
report to the risk management committee and senior management; and

• Participate, coordinate and oversee risk management and execution information system;
improve risk management method, technology and model; ensure common awareness and
use of risk information among various functional departments to satisfy the requirements
of risk assessment and supervision.

Enterprise Risk Management

With our strong focus on compliance, we developed our systematic enterprise risk management
framework, which sets forth our policies in determining the risk limits and adopts the standards of our
accounting and statutory metrics. We use our own risk and solvency assessment (ORSA), in line with
the relevant Chinese regulations. ORSA provides us with an internal process for assessing the
effectiveness of risk-management capabilities and solvency under both normal and stressed
conditions. ORSA also helps us evaluate material risks that could affect our ability to meet
policyholder obligations, including market risks, credit and underwriting risks, liquidity risks, and
operational risks.

At the same time, the risk-management function is incorporated with loss control and risk-return
optimization into its role. During the ongoing dialogue with other functions (such as finance) and
other business departments, we identify potential issues and, where helpful, challenge common
practices. The function develops an understanding of corporate strategies and the ability to model risk
capitalization and conduct stress testing, which then converts into strategic input for further
management.

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Management of Insurance Risk

We face insurance risks, which involve the potential loss arising from, among others: (i)
defective product design; (ii) mispricing of products or inadequate reserves due to inaccurate
assumptions regarding factors such as loss ratio and surrender rate, (iii) inappropriate reinsurance
arrangements or (iv) unanticipated major claim settlement. Our actuarial department is key to our
insurance risk management, which is actively involved in product development, pricing and
underwriting.

We face risks relating to defective product design or inaccurate assumptions. Potential loss might
arise from a particular insurance product as a result of actual market conditions, loss experience being
different from the assumed market conditions and loss experience used when designing and pricing the
product. We manage product design risk through comprehensive product tests. Our product review
committee establishes standards and guidelines designed to ensure that our level of product risk for
a particular product is within an acceptable range and consistent with the designed profile of the
product. The standards and guidelines cover, among other things, product design, pricing methods,
assumption setting, capital requirement, profit margin objectives, documentation, approval processes
and loss experience monitoring programs. Our big data-based dynamic pricing assists us in managing
relevant product risks. In addition, we set aggregate retention limits and purchase reinsurance to
further reduce our product risk.

If an insurer’s pricing is based on assumptions that prove inadequate, it may have an adverse
impact on our continuous and healthy business operations. We manage pricing and underwriting risk
by pre-pricing actuarial tests and post-pricing follow-up and pricing corrections. We price and
underwrite our products based on strict actuarial testing and assessment supported by our big data
analysis of historical claims. We also focus on post-development tracking and monitoring, collecting
performance data of launched products and conducting tests on the rationality of pricing periodically.
If relevant data indicates that our actual experience differs significantly from our original expectations
of a product, we will re-price, re-design or discontinue to sell the product, as appropriate.

We also face reinsurance and catastrophe risks which are the possibilities of significant financial
losses arising from a lack of sufficient reinsurance of assumed risks or from a particular catastrophe.
In order to manage such risks, we have a tiered cession scheme to integrate, among others, treaty
reinsurance, facultative reinsurance and catastrophe reinsurance together. We limit the maximum
retention amount of certain insurance products or certain types of products. We have entered into
various reinsurance arrangements and agreements with domestic as well as international reinsurance
companies to reduce excessive risks exposure.

We also face solvency risk, which refers to the risk of an insurance company losing its ability
to pay back maturing debts and future obligations. We conduct solvency test on a regular basis and
we monitor our overall solvency margin and provide a relevant report to the CIRC on a semi-annual
basis. We not only periodically monitor our solvency margin ratio, but also conduct identification and
assessment in line with regulatory requirements to determine the presence of significant solvency risk.
We enhance our solvency margin through formulating proper reinsurance plans, and taking measures
to strengthen our capital base, such as capital increases and issuance of subordinated debts in response
to changes in solvency margin.

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Management of Market Risk

Market risk is the risk of potential loss on future earnings, fair values or future cash flows that
may result from changes in the value of a financial instrument due to changes in interest rates, market
prices and other factors that affect market risk sensitive instruments. Market risk is attributed to all
market risk sensitive financial instruments. We manage our market risk exposure in a variety of ways
and use various quantitative models to assess market risks, including sensitivity analysis, setting
trading limit, stress test and scenario analysis, which are common tools in the insurance as well as
asset management industries. We routinely conduct sensitivity analyses on our debt securities and
equity portfolios in an effort to estimate our exposure to fluctuations in interest rates or equity indices.
We also conduct stress tests to monitor compliance with internal targets for solvency and capital and
target for credit ratings.

A major market risk we face is interest rate risk, which predominantly arises from investments
in long-term debt securities which are exposed to fluctuations in interest rates. We monitor and assess
our interest rate risk regularly by conducting sensitivity analysis and stress tests based on the analysis
of discrepancies between assets and liabilities, and we seek to manage our interest rate risk by
adjusting our portfolio compositions and by managing, to the extent possible, the average duration and
maturity of our portfolio.

Management of Credit Risk

Credit risk is the risk of economic loss resulting from the failure of one of our obligors to make
any payment of principal or interest when due and the loss in value resulting from a corporate failure.
We are exposed to credit risks primarily associated with our fixed income investments, our credit
guarantee insurance and our reinsurance arrangements with reinsurers. We mitigate credit risk by
utilizing detailed credit control policies, by undertaking credit analysis on potential investments, and
by imposing aggregate counter party exposure limits on our investment portfolios. Our investment
guidelines also require the risk levels of the various investment sectors to be continuously monitored
with allocations adjusted accordingly.

We manage the credit risk associated with our credit guarantee insurance and solutions by
adopting credit assessment of borrowers based on data available to us and our big data analytics. We
obtain information on borrowers, such as their consumption behaviors, from our ecosystem partners,
and have connected our system to a number of major big data service providers, such as the PBOC
credit reference center, the identification database of the Public Security Bureau, Sesame Credit, Qian
Hai Zheng Xin, Lawxp.com (匯法網), Tongdun (同盾) and Bairong Financial (百融金服).

In order to ensure accuracy of credit assessment of borrowers, we conduct credit assessment,


which includes a credit score model, anti-fraud technology based on artificial intelligence
technologies, blacklist screening, risk pricing techniques based on historical default rate and loss level
and risk assessment of our partners and transaction counterparties. Our credit score modeling and
borrower profiling are based on credit information, social information, transactional information and
other variables and we classify and manage our borrowers based on their credit scores.

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We also monitor credit risk during the terms of the credit facilities. To facilitate independent risk
assessment of borrowers, we adopt measures which include a combination of cash flow calculations
and stress tests with our ecosystem partners, and effective delinquency management. We also conduct
weekly or monthly evaluation on our insurance products to track the trend of product performance and
forecast potential defaults.

During the Track Record Period, we provided credit guarantee insurance to lenders of personal
loans on the platform of Zhaocaibao when they acquired the right to receive repayment of the
underlying loans from other lenders who wish to cash out on their investments before the maturity of
these loans. Some of the underlying loans involved corporate bonds. In December 2016, certain of
these corporate bonds defaulted and the direct insurer of the repayment of these bonds, which is a
different insurance company from us, was required to repay the loan amounts. We did not pay
insurance claims in this incidence, as the direct insurer paid all insurance claims. Nevertheless, a
default of a large underlying asset may expose us to heightened risks of insurance claims. We have
no longer provided such credit guarantee insurance since the middle of 2016.

To reduce the credit risk associated with our reinsurance agreements, specific counterparty
exposure measures and limits are imposed. In addition, we monitor the financial conditions of our
reinsurers on an ongoing basis and review our reinsurance agreements periodically. In addition, we
regularly review overdue balances and make provision for doubtful debts covering both general and
specific provisions based on the aging of the premiums receivables. We assess our investment and
reinsurers with reference to internal and external credit ratings and periodically re-assess such ratings
to ensure accurate control procedures.

Management of Operational Risk

Operational risk is the risk of loss resulting from breakdowns in information, communication,
transaction processing, settlement systems and procedures. Operational risks include failure to obtain
proper internal authorizations or to properly document transactions, equipment failure, inadequate
training or errors by employees. Our cloud-based system and blockchain technology allow us to
properly back up important documentation while maintaining the security. We also adopt strict data
protection policy to ensure the security of our proprietary data.

We manage operational risk by establishing clear policies, requiring processes to be well


documented and ensuring that transactions are reconciled and monitored. Our management of
operational risk begins with the product managers, who take initial responsibility for supervising our
operating personnel for compliance with the control standards established by our respective businesses
as well as applicable laws and regulations. Their efforts to manage operational risk are overseen by
our senior management and audit committee to ensure our operations are conducted in accordance with
our internal policies.

We also manage operational risks with regards to our business cooperation with external parties.
As we work closely with our ecosystem partners and other business partners in many aspects of our
operations, we require our business department to evaluate and assess the partners’ risk profiles based
on historical experience and our internal policy.

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Management of Strategic Risks

Strategic risk refers to the risk of ineffective business strategies and executions or inability to
react to the changes in industry and business environments. We aim to manage our strategic risks by
establishing a comprehensive, forward-looking and adaptive system led by the strategic development
department and the chief risk officer.

We periodically review and assess our business strategies and take into consideration the
regulatory development, macro- and micro-economy, technological development and industry trends.
We also review our internal resource allocations, including technology, human resource, sales and
marketing. We provide regular and specialized trainings tailored to the needs of our employees in
different departments. Through these trainings, we ensure that our staff ’s skill sets remain up-to-date
and enable them to discover and meet our customers’ needs.

Management of Reputation Risk

Reputational risk is the risk of our loss from events which negatively impact our brand and
reputation. During the ordinary course of business we may face unfavorable media coverage, which
may cause significant reputational damage to us, disrupt our business operations, and even lead to
large-scale surrenders of our insurance products.

In order to effectively manage reputational risk, we have proactively strengthened the


development of our brand and corporate culture, and carried out professional brand promotions. We
are proactively exploring approaches to guard and promote our brand and reputation so as to enhance
business development and brand image. We take precautionary steps in prohibiting reputational risks.
We have established special mechanisms for crisis prevention and management, and improved our
system-wide capabilities in monitoring and responding to media coverage, which is used as guidance
on our analyses of our management of crises. At the same time, we have strengthened our external
communications, in an effort to prevent and manage crises, and maintained favorable relationships
with social media.

Management of Liquidity Risk

Liquidity risk is the risk of not having access to sufficient funds to meet our obligations as they
become due. We are exposed to liquidity risk on insurance products that permit surrender, withdrawal
or other forms of early termination. We seek to manage our liquidity risk by matching to the extent
possible the duration of our investment assets with the duration of our insurance products. We rely on
a broad range of liquidity sources to meet our funding needs. We fund our operations principally from
the receipt of written premiums and policy fees from policyholders and the related investment income.
We may also obtain short-term borrowings in the form of repurchase agreements, as well as raise funds
through the sale of investments from time to time.

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We have implemented various detailed measures to manage our liquidity risks which, among
others, include:

• improve the design and management of insurance products with a view towards reducing
the possibility of unexpected liquidity demand;

• monitor our liquidity position in compliance with regulatory and our internal requirements;

• review the expenditure and deposits of the Company on a regular basis; and

• highlight the liquidity management targets in entrustment asset management and determine
appropriate strategic asset allocation ratio to maintain the liquidity of our investment
portfolio.

We also face asset and liability matching risk, which refers to the risk resulting from the
mismatches of duration of assets and duration of liabilities and mismatches of cash flows and
investment income. We have strengthened the managements of cost benefit, duration and risk
prediction based on solvency margin constraint and the characteristics of liability for insurance
products, to ensure the insurance investments are under the value of risk limit. We also use various
measures including gap analyses, sensitivity analyses and scenario analyses to evaluate and manage
the mismatch risks of assets.

Management of Internal Control, Audit and Financial Reporting Risks

We have established a series of policies and procedures related to our internal control and
management of internal audit risks and financial reporting risks. These policies and procedures are
carried out on an on-going basis from a risk-oriented perspective to deal with the various types of risks
encountered by us during our internal control and financial management processes and to better help
us achieve our business objectives.

Internal Control Risk

We have designed and adopted strict internal procedures to ensure the compliance of our business
operations with the relevant rules and regulations.

In accordance with these procedures, our in-house legal and compliance department, which
consists of 12 members with an average of nine years of experience in internal control, performs the
fundamental function of reviewing and updating the form of contracts. Our legal and compliance
department examines the contract terms and reviews all relevant documents for our business
operations, including licenses and permits obtained by the counterparties to perform their obligations
under our business contracts and all the necessary underlying due diligence materials, before we enter
into any contracts or business arrangements.

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We also have in place detailed internal procedures to ensure that our in-house legal and
compliance department reviews our products and solutions, including upgrades to existing products,
for regulatory compliance before they are made available to the general public. Our in-house legal and
compliance department is responsible for obtaining any requisite governmental pre-approvals or
consents, including preparing and submitting all necessary documents for filing with relevant
government authorities within the prescribed regulatory timelines.

We review the implementation of our risk management policies and measures to ensure our
policies and implementation are effective and sufficient.

Internal Audit Risks

The audit committee of the Board is the key to our internal audit functions. It has the following
principal duties and responsibilities relating to our risk management:

• review fundamental internal audit schemes and make suggestions to our Board, and approve
annual internal audit plans and budget;

• provide guidance for internal audits and supervise the quality of internal audits;

• coordinate internal and external audits and supervise the correction of major issues
identified by internal and external audits; and

• periodically review the completeness and effectiveness of our internal control systems and
accept and handle material complaints regarding internal control.

Financial Reporting Risks

We have in place a set of accounting policies in connection with our financial reporting risk
management, such as financial report management policy, budget management policy, financial
statements preparation policy, and financial department and staff management policy. We have various
procedures in place to implement accounting policies, and our financial department reviews our
management accounts based on such procedures. In addition, the senior members of our finance
department are all experienced in finance and accounting. We also provide regular training to our
financial department staff to ensure that they understand our accounting policies.

Risk Management of Information System

Sufficient maintenance, storage and protection of user data and other related information is
critical to our success. We have implemented relevant internal procedures and controls and adopted
security measures to ensure that user data is protected and that leakage and loss of such data are
avoided. During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any material information leakage or loss of user data.

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INTERNAL CONTROL MEASURES

In preparation for the Global Offering, we engaged an independent consulting firm (the “Internal
Control Consultant”) to perform a review over selected areas of our internal controls over financial
reporting (the “Internal Control Review”) in November 2016. The scope of the Internal Control
Review in November 2016 performed by the Internal Control Consultant was agreed upon among us,
the Joint Sponsors and the Internal Control Consultant. The selected areas of our internal controls over
financial reporting that were reviewed by the Internal Control Consultant included controls over
product development, marketing and customer management, underwriting, consumer finance, claims,
actuarial management, investment, treasury, reinsurance and co-insurance, human resources, fixed
assets management, purchase, financial management, taxation, information technology and company
level controls. The Internal Control Consultant performed a Follow-up Review in June 2017 (the
“Follow-up Review”) to review the status of the management actions by us to address the findings of
the Internal Control Review. The Internal Control Consultant did not have any further recommendation
in the Follow-up Review. The Internal Control Review and the Follow-up Review were conducted
based on the information we provided and no assurance or opinion on internal controls was expressed
by the Internal Control Consultant.

After considering our remedial actions, our Directors are of the view that these enhanced internal
control measures are adequate to ensure the effectiveness of our internal control over financial
reporting in the future. Based on the relevant due diligence work conducted, the Joint Sponsors are
of the view that the internal control measures, if implemented continuously, are adequate and effective
to prevent similar findings of internal control over financing reporting from recurring in the future.

ASSET MANAGEMENT

With respect to the investment of our insurance funds, we strictly comply with the requirements
of relevant PRC laws and regulations and implement prudent risk management by establishing a
comprehensive asset management framework to ensure that our assets are properly managed. Our
Board bears the ultimate responsibility for the allocation, investment policies, risk management and
internal control regarding the investment assets. In particular, we have established an Investment
Strategy Committee under our Board of Directors, comprising Mr. Xinyi Han, Mr. Jimmy Chi Ming
Lai, Mr. Hugo Jin Yi Ou and is chaired by our CEO, Mr. Jin Chen, to be in charge of our investment
assets, including the review of annual investment plans and guidelines, overall strategy of
investments, the use of insurance funds, investment policies and the approval and authorization
mechanism for major investment decisions. Each member of our Investment Strategy Committee has
prior experience in financial investment.

Pursuant to the regulation by the CIRC, our insurance funds, after approval, can be invested in,
among others, bank deposits, bonds, equity securities, security investment funds, preferred shares,
venture capital investment funds, RMB-denominated stocks listed on PRC stock exchanges, equities
of unlisted companies or equity investment funds, infrastructure debt investment plans, real
properties, financial products, financial derivatives and overseas investment.

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We set up our investment guidelines in accordance with the relevant CIRC requirements on an
annual basis. The annual investment plan and guidelines have to be reviewed by the Investment
Strategy Committee and approved by the Board. Our annual investment plan and investment
guidelines provide for the following investable assets:

(i) liquid assets, mainly including cash, money market funds, bank current deposit, bank call
deposit, money market insurance asset management products and government bonds,
quasi-government bonds and reverse repurchase agreements;

(ii) fixed-income assets, mainly including bank deposit, bank agreement deposit, bond fund,
fixed income insurance asset management products, financial company bonds and
nonfinancial company bonds;

(iii) equity assets, mainly including listed equity assets which include stock (including preferred
shares), equity funds, hybrid funds, equity insurance asset management products, as well as
unlisted equity assets which include unlisted equity interest, equity investment funds and
other related financial products; and

(iv) other investments, mainly including financial assets of commercial banks, credit asset
backed securities of financial institutions, collected fund trust plan of trust companies,
special asset management plans of securities companies, project asset support plans of
insurance asset management companies, and other insurance asset management products as
well as real estate, facilities investment plans, real estate investment plans, real estate
insurance assets management products and other real estate related financial products.

Our investment strategy is as follows: (i) for fixed income debt investment, we primarily invest
in bonds with high liquidity, high credit ratings and high pledge rate; (ii) for public equity investment,
we focus on publicly traded stocks with high dividend yield; and (iii) for other investments, we
carefully select reputable trust products with high credit ratings or security, and wealth management
products with high liquidity.

As part of our investment policies and risk management measures, we set trading limit for each
investment asset class as follows:

Risk monitoring percentage of


Asset class Category asset ratio limit total assets

Liquid assets N/A Liquid assets and governmental


bonds and quasi-government
bonds with remaining period until
maturity of more than one year
should account for less than 7%
of the Company’s total assets at
the end of last quarter.

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Risk monitoring percentage of


Asset class Category asset ratio limit total assets

Fixed-income assets N/A Domestic bonds whose long-term


credit rating are below AA level
(including AA level) rated by
domestic credit rating agencies
should account for no more than
10% of the Company’s total
assets at the end of last quarter.

The fund balance of interbank


borrowings and bond repurchase
should account for no more than
20% of the Company’s total
assets at the end of last quarter.
Equity assets No more than 30% of the total Equity assets should account for
assets of the Company at the end no more than 20% of the
of last quarter, and the carrying Company’s total assets at the end
amount of a single equity of last quarter.
investment is not higher than the
net assets at the end of last
quarter
Real estate assets No more than 30% of the Real estate assets should account
Company’s total assets at the end for no more than 20% of the
of last quarter, of which the Company’s total assets at the end
amount used to purchase of last quarter.
self-property is no more than
50% of the net assets of last
quarter
Other financial assets No more than 25% of the Other financial assets should
company’s total assets at the end account for no more than 15% of
of last quarter the Company’s total assets at the
end of last quarter.

In addition, in accordance with CIRC requirements, we set the contribution limit for our
investments which requires that the carrying balance of any single asset should not exceed 5% of our
total assets at the end of the last quarter and that the carrying balance of our total investments in a
single legal entity should not exceed 20% of our total assets at the end of the last quarter. In the event
that our investment ratio exceeds the risk monitoring percentage listed above, we are required to report
such event to the CIRC within five working days and we will increase our attention to the relevant
asset class. In the event that our investment ratio exceeds the category asset ratio limit or the
concentration limit described above, we will adjust our investment to make the ratio fall within the

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corresponding limit within 20 working days. Approval from senior management in charge of asset
management is required if the circumstance that our investment ratio exceeds the set limit is due to
withdrawal of funds or temporary investment needs, or if we will not be able to adjust our investment
due to market liquidity.

Our investing activities consist of cooperating with third-party asset management companies and
purchasing asset management products. We cooperate with two third-party asset management
companies, Ping An Asset Management Co., Ltd. and China Merchants Fund Management Co., Ltd.,
to provide investment and asset management services with an investment mandate. We had total assets
under management of RMB7,379.0 million and RMB31.1 million managed by Ping An Asset
Management Co., Ltd. and China Merchants Fund Management Co., Ltd. respectively as of March 31
2017. These investment management companies are required to follow strictly the requirements under
the PRC Insurance Law, the investment restrictions and guidelines published by the CIRC, the
investment guidelines approved by our Board of Directors every year, and the terms and conditions
provided in our agreements. We conduct overall market monitoring on a regular basis, and require
these investment management companies to do so in order to manage the risk of their investment
portfolios. In addition, we purchased a wealth management product managed by Sinosafe Asset
Management Co., Ltd. in our own capacity with carrying value of RMB300 million as of March 31,
2017, which is categorized as one of the wealth management products under other investments. We
also made direct investments with total carrying value of RMB327.6 million as of March 31 2017,
including wealth management products and money market funds issued by other asset management
companies and certain unlisted equity shares.

We submit quarterly reports to the CIRC and are in compliance with relevant CIRC requirements
with respect to asset management. We also require the asset management companies to provide us with
daily asset valuation reports and asset holding reports for us to monitor our portfolio and monthly
reports of asset balance for us to calculate investment yields. Our net investment income and total
investment yield decreased significantly in 2016 due to the market condition of the PRC capital
market. In 2016, the Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange
Component Index dropped by 12.3% and 19.6%, respectively. We are developing our in-house asset
management team to obtain relevant qualifications, conduct investment research and build up
investment capabilities.

We had total investment assets of RMB1,149.6 million, RMB7,706.0 million, RMB7,837.3


million and RMB7,737.7 million as of December 31, 2014, 2015 and 2016 and March 31, 2017,
respectively. See “Financial Information — Discussion of Selected Consolidated Financial Position
Information” for more details. During the Track Record Period and up to the Latest Practicable Date,
we had not been subject to administrative penalties or fines as a result of our insurance funds
utilization. Our PRC Legal Advisor is of the view that we have complied with the relevant rules and
regulations in all material aspects in relation to our investment mix, including the Interim Measures
for the Administration of Utilization of Insurance Funds and the Notice on Regulating Stock
Investments Business of Insurance Institutions.

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The following table sets forth the portfolio of our total investment assets as of the dates
indicated:

As of December 31, As of March 31,

2014 2015 2016 2016 2017

Carrying % of Carrying % of Carrying % of Carrying % of Carrying % of


Items value total value total value total value total value total

(RMB in thousands except for percentage (%))


(unaudited)

Cash and cash


equivalents . . . . . . . 141,696 12.3% 1,374,797 17.8% 1,139,953 14.5% 819,264 11.2% 1,005,988 13.0%
Fixed income
investments . . . . . . . 451,390 39.3% 3,316,955 43.0% 3,175,349 40.5% 3,909,523 53.5% 2,955,878 38.2%
Bonds . . . . . . . . . . . . 341,390 29.7% 3,070,350 39.8% 2,627,837 33.5% 2,875,415 39.4% 2,709,253 35.0%
Government bonds . . . — 0.0% 270,205 3.5% 24,431 0.3% 574 0.0% 3,297 0.0%
Financial bonds . . . . . — 0.0% 245,554 3.2% — 0.0% 31,137 0.4% 4,999 0.1%
Corporate bonds. . . . . 341,390 29.7% 2,554,591 33.2% 2,603,406 33.2% 2,843,704 38.9% 1,593,221 20.6%
Interbank deposits . . . — 0.0% — 0.0% — 0.0% — 0.0% 1,107,736 14.3%
Other fixed income
investments . . . . . . . . . 110,000 9.6% 246,605 3.2% 547,512 7.0% 1,034,108 14.2% 246,625 3.2%
Statutory deposits . . . . 200,000 17.4% 248,125 3.2% 248,125 3.2% 248,125 3.4% 248,125 3.2%
Securities purchased
under agreements to
resell. . . . . . . . . . 50,000 4.3% — 0.0% 302,087 3.9% 799,500 10.9% 800 0.0%
Less: Securities sold
under agreements to
repurchase . . . . . . (140,000) (12.2%) (1,520) 0.0% (2,700) (0.0%) (13,517) (0.2%) (2,300) 0.0%
Equity and investment
funds . . . . . . . . . . . 148,227 12.9% 1,806,341 23.4% 1,936,965 24.7% 959,772 13.1% 1,785,222 23.1%
Stocks . . . . . . . . . . . . 54,008 4.7% 1,284,732 16.7% 1,491,395 19.0% 246,520 3.4% 1,656,977 21.4%
Investment funds . . . . . . 94,219 8.2% 496,609 6.4% 420,570 5.4% 688,252 9.4% 103,245 1.3%
Unlisted equity shares . . . — 0.0% 25,000 0.3% 25,000 0.3% 25,000 0.3% 25,000 0.3%
Other investments . . . . 408,299 35.5% 1,207,896 15.7% 1,585,038 20.2% 1,618,455 22.1% 1,990,611 25.7%
Wealth management
products . . . . . . . . . 208,171 18.1% 717,984 9.3% 864,359 11.0% 728,543 10.0% 1,109,397 14.3%
Trust . . . . . . . . . . . . . 200,128 17.4% 489,912 6.4% 720,679 9.2% 889,912 12.2% 881,214 11.4%

Total investment assets .1,149,612 100.0% 7,705,989 100.0% 7,837,305 100.0% 7,307,014 100.0% 7,737,699 100.0%

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The following table sets forth the relevant information on our investment income during the
Track Record Period:

For the year ended December 31, For the three months ended March 31,

2014 2015 2016 2016 (unaudited) 2017

Yield Yield
Investment Investment Investment (not Investment (not Investment
Items Yield (1) income Yield (1) income Yield (1) income annualized) (1) income annualized) (1) income

(RMB in thousands except for percentage (%))

Cash and fixed income


investments . . . . . . . 7.0% 41,445 4.5% 118,069 4.0% 180,964 1.2% 55,075 1.0% 40,881
Interest income (2) . . . . . . 41,229 110,846 172,069 40,466 38,293
Interest expenses (3) . . . . . (5,702) (3,078) (203) (157) (445)
Realized gain . . . . . . . . 5,918 9,276 10,060 15,576 3,479
Unrealized gain / (losses) . — 1,025 (962) (810) (446)
Equity and investment
funds . . . . . . . . . . 19.5% 28,971 41.0% 400,981 (6.8%) (127,799) (21.2%) (293,228) (3.6%) (66,199)
Dividend income . . . . . . 14,660 11,929 24,473 5,525 95,719
Realized gain / (losses). . . 4,397 349,466 (195,100) (247,128) (65,786)
Unrealized gain . . . . . . . 9,914 39,586 42,828 (51,625) (96,132)
Other investments . . . . . 3.4% 13,857 4.8% 39,167 6.2% 87,099 1.3% 18,468 1.3% 23,870
Interest income (4) . . . . . . 5,194 35,440 86,493 18,468 23,338
Realized gain . . . . . . . . 8,663 3,727 629 — 509
Unrealized losses . . . . . . — — (23) — 23
Total investment yield (5) . 7.3% 12.6% 1.8% (2.9%) (0.0%)
Net investment yield (6) . . 4.8% 3.5% 3.6% 0.9% 2.0%

Note:

(1) Yields are calculated by dividing the investment income generated by the relevant assets for the period by the average
of the balance of such investment assets as at the beginning and end of the period, except for the year ended 31 December
2014, for which yields are calculated by dividing the investment income generated by the relevant assets for the period
by the balance of such investment assets as at the end of the period.
(2) Sum of interest income from bank deposits, bond investments, securities purchased under agreements to resell.
(3) Interest expenses related to securities sold under agreements to repurchase.
(4) Interest income from trust investments.

(5) Total investment yield equals total investment income (defined as the sum of net investment income and net fair value
gains through profit or loss, less interest expense relating to securities sold under agreements to repurchase) for the
period as a percentage of the average of the opening and closing balances of total investment assets of the period (in the
case of 2015 and 2016 and the three months ended March 31, 2016 and 2017) or the closing balance of total investment
assets of the period (in the case of 2014).

(6) Net investment yield equals the sum of interest income and dividend income less interest expense relating to securities
sold under agreements to repurchase for the period as a percentage of the average of the opening and closing balances
of total investment assets of the period (in the case of 2015 and 2016 and the three months ended March 31, 2016 and
2017) or the closing balance of total investment assets of the period (in the case of 2014).

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In 2014, our yield from cash and fixed income investments was relatively high at 7.0% mainly
because we utilized securities sold under agreements to repurchase to increase our yield and because
of the strong performance of the PRC bond market. Our yield from cash and fixed income investments
decreased to 4.5% in 2015, 4.0% in 2016 and 1.0% (unannualized) in the three months ended March
31, 2017 due to the decrease in our holding of securities under agreements to repurchase.

Our yield from equity and investment funds is primarily determined by the general conditions of
the PRC stock market. In 2014, 2015 and 2016 and the three months ended March 31, 2017, the
Shanghai Stock Exchange Composite Index changed by 53.1%, 8.6%, -12.3% and 3.8%, respectively,
and the Shenzhen Stock Exchange Component Index changed by 36.3%, 13.6%, -19.6% and 2.2%,
respectively. As a result, our yield from equity and investment funds was 19.5%, 41.0%, -6.8% and
-3.6% (unannualized), respectively, in the same periods.

Our yield from other investments increased from 3.4% in 2014 to 4.8% in 2015 and further to
6.2% in 2016, and was 1.3% (unannualized) in the three months ended March 31, 2017. The increase
from 2014 to 2016 was primarily due to our improved investment strategies. We carefully select
reputable trust products with high credit ratings or security, as well as wealth management products
with high liquidity to increase our yields.

Cash and Cash Equivalent/Equivalents

Cash and cash equivalent/equivalents primarily include cash and time deposit. As of March 31,
2017, 13.0% of our total investment assets were in the form of cash and cash equivalent/equivalents.

Bonds

During the Track Record Period, our investment in bonds included government bonds, financial
bonds, corporate bonds and interbank deposits. As of March 31, 2017, 99% of the bonds we held
received external ratings of AA level or above with more than 40% of them received external ratings
of AAA level. All the bonds we held are either exchange-traded or traded through the inter-bank
markets.

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The table below sets forth details of our top 10 bond holdings as of March 31, 2017:

Carrying Percentage
Remaining value (in of total
maturity Credit Coupon thousands investment
Bond Sector Exchange category rating rate Tenor of RMB) assets

Bond 1 . . . . Financial Interbank 3 months - AA+ 4.05% 1 year 191,460 2.5%


market 1 year
Bond 2 . . . . Construction Exchange- 1 - 5 years AA+ 7.09% 7 years 124,600 1.6%
traded
Bond 3 . . . . Real estate Exchange- 1 - 5 years AAA 3.89% 3 years 101,600 1.3%
traded
Bond 4 . . . . Real estate Exchange- 1 - 5 years AA 5.35% 3 years 100,720 1.3%
traded
Bond 5 . . . . Mining Exchange- 1 - 5 years AA+ 6.18% 5 years 99,890 1.3%
traded
Bond 6 . . . . Financial Interbank Within 3 AAA 4.50% 3 months 98,880 1.3%
market months
Bond 7 . . . . Financial Interbank Within 3 AA+ 4.55% 3 months 98,870 1.3%
market months
Bond 8 . . . . Financial Interbank 3 months - AAA 4.40% 9 months 96,740 1.3%
market 1 year
Bond 9 . . . . Financial Interbank 3months - AAA 4.22% 1 year 95,690 1.2%
market 1 year
Bond 10 . . . Manufacturing Exchange- Within 3 AA+ 3.85% 9 months 79,856 1.0%
traded months
Total of
top 10 . . 1,088,306 14.1%

Government Bonds

Government bonds have maturities of up to 30 years and pay tax-exempt interest. As of March
31, 2017, the government bonds, all of which were issued by the PRC government, represented 0.04%
of our total investment assets. Some of our government bonds are measured by fair value. The fair
value of our government bond investments that are actively traded in exchanges is determined on the
basis of its recent quoted market price on each balance sheet date. For government bonds traded
relatively inactively on markets where price quotations are not available, their fair value is estimated
by referring to (including but not limited to) the latest traded price or the latest market price of similar
bonds on active trading market, or determined through other valuation techniques. As of March 31,
2017, all of our government bonds had maturities over five years.

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Financial Bonds

Financial bonds include policy financial bonds and bonds issued by financial institutions. Policy
financial bonds are bonds issued by the three state-owned policy banks of the PRC, namely, China
Development Bank, the Export-Import Bank of China and Agricultural Development Bank of China.
Policy financial bonds are generally traded through the interbank markets. As of March 31, 2017,
financial bonds represented 0.1% of our total investment assets. The fair value of our financial bonds
is estimated using the same methods as for assessing the fair value of government bonds. As of March
31, 2017, all of our financial bonds had maturities over five years.

Corporate Bonds

Although corporate bonds may be less liquid than most other types of fixed-income securities,
they generally earn higher yields and have longer maturities than most other fixed-income
instruments. Insurance companies in the PRC are permitted to invest in unsecured bonds publicly
issued by non-financial institutions in the PRC. As of March 31, 2017, corporate bonds represented
20.6% of our total investment assets. The fair value of our corporate bonds is estimated using the same
methods as for assessing the fair value of government bonds. As of March 31, 2017, approximately
62%, 35% and 3% (in terms of the carrying value) of our corporate bonds had maturities within one
year, from one year to five years and over five years, respectively.

Interbank Deposits

An interbank deposit is an investment product issued in the interbank market ,which is


categorized as a bond pursuant to the relevant CIRC rules. An interbank deposit is a certificate of
deposit held by one bank for another bank issued in the interbank market. The investment targets of
interbank deposits are members of national interbank lending market, mutual fund management
companies and mutual funds. As of March 31, 2017, interbank deposits represented 14.3% of our total
investment assets. As of March 31, 2017, all of our interbank deposits had maturities within one year.

Stocks

Qualified PRC insurance companies are permitted to invest a portion of their insurance funds
directly in shares of companies listed on the Shanghai Stock Exchange, Shenzhen Stock Exchange and
the main board of the Hong Kong Stock Exchange. As of March 31, 2017, stocks held by us
represented approximately 21.4% of our total investment assets.

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The table below sets forth details of our top 10 stock holdings as of March 31, 2017:

Carrying
No of shares value (in Share of total
held (in Percentage of thousands of investment
Stock Sector Exchange thousands) shareholding RMB) assets

Stock 1 . . . . Food and Shenzhen Stock 10,513 0.28% 452,048 5.8%


beverage Exchange
Stock 2 . . . . Food and Shenzhen Stock 5,311 0.38% 224,067 2.9%
beverage Exchange
Stock 3 . . . . Food and Shenzhen Stock 24,360 2.99% 218,507 2.8%
beverage Exchange
Stock 4 . . . . Chemical Shanghai Stock 5,206 1.68% 190,488 2.5%
Exchange
Stock 5 . . . . Packaging Shenzhen Stock 7,265 3.72% 130,045 1.7%
Exchange
Stock 6 . . . . Food and Shanghai Stock 310 0.02% 119,735 1.5%
beverage Exchange
Stock 7 . . . . Textile Shanghai Stock 6,433 0.18% 89,615 1.2%
and Exchange
garment
Stock 8 . . . . Agriculture Shenzhen Stock 3,529 0.62% 75,733 1.0%
Exchange
Stock 9 . . . . Financial Shenzhen Stock 1,330 0.09% 37,063 0.5%
Exchange
Stock 10 . . . Food and Shenzhen Stock 400 0.03% 34,952 0.5%
beverage Exchange
Total of top
10. . . . . . . 1,572,253 20.3%

Investment Funds

PRC insurance companies are permitted to invest in close-ended and open-ended securities
investment funds managed by mutual fund management companies as well as in private equity funds.
As of March 31, 2017, 1.3% of our total investment assets were represented by investment funds.
During the Track Record Period, we invested solely in open-ended funds, including equity funds and
debt funds.

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Other investments

Other investments include: (i) wealth management products, which include asset management
plans issued by reputable financial institution such as Ping An Asset Management Co., Ltd.; and (ii)
trust products, which typically have longer terms and higher return over investment as compared to
traditional fixed income products and receive external ratings of AA level or above. As of March 31,
2017, other investments held by us represented approximately 25.7% of our total investment assets.

As of March 31, 2017, we had five wealth management products in our investment portfolio, as
set forth in the table below:

Carrying value
Product (in thousands of
Product Type Issuer Maturity Date Underlying Assets RMB)

Wealth Management Investment Ping An Asset July 30, 2018 Fixed income 388,083
Product 1 . . . . . . . Management Co.,
Ltd.
Wealth Management Investment Ping An Asset August 4, 2017 Fixed income 358,515
Product 2 . . . . . . . Management Co.,
Ltd.
Wealth Management Investment Sinosafe Asset No fixed Liquid assets; 300,000
Product 3 . . . . . . . Management Co., maturity date fixed income;
Ltd. financial
products
Wealth Management Investment Ping An Asset No fixed Fixed income 31,403
Product 4 . . . . . . . Management Co., maturity date
Ltd.
Wealth Management Investment Ping An Asset No fixed Fixed income 31,396
Product 5 . . . . . . . Management Co., maturity date
Ltd.

Total . . . . . . . . . . . 1,109,397

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As of March 31, 2017, we had six trust products in our investment portfolio, as set forth in the
table below:

Carrying
value (in
Product Maturity Underlying Credit thousands of
Product Type Issuer Date Assets Rating Security RMB)

Trust Product 1 . . Financing Shanghai 12/4/2025 Urban AAA Company 350,000


International infrastructure guarantee
Trust
Corporation
Limited
Trust Product 2 . . Financing CITIC Trust 3/30/2021 Commercial AA+ Company 200,000
real estate guarantee
and asset
pledge
Trust Product 3 . . Financing CCB Trust 3/30/2021 Commercial AA+ Company 180,000
Co., Ltd. real estate guarantee
and asset
pledge
Trust Product 4 . . Financing CITIC Trust 8/24/2018 Commercial AA+ Company 61,361
real estate guarantee
Trust Product 5 . . Financing Bank of 7/6/2020 Infrastructure AAA Company 49,853
Communications guarantee
International
Trust Co., Ltd.
Trust Product 6 . . Financing Shanghai 4/30/2018 Commercial AAA Company 40,000
International real estate guarantee
Trust and asset
Corporation pledge
Limited
Total. . . . . . . . . 881,214

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INTELLECTUAL PROPERTY

Intellectual property rights are fundamental to our business, and we devote significant time and
resources to their development and protection. We protect our intellectual property rights through a
combination of patent, copyright, trademark and other intellectual property laws as well as
confidentiality and license agreements with our employees, suppliers, partners and others. In general,
our employees must enter into a standard employment contract which includes a clause acknowledging
that all inventions, trade secrets, developments and other processes generated by them on our behalf
are our property, and assigning to us any ownership rights that they may claim in those works. Despite
our precautions, third parties may obtain and use intellectual property that we own or license without
our consent. Unauthorized use of our intellectual property by third parties and the expenses incurred
in protecting our intellectual property rights from such unauthorized use may adversely affect our
business and results of operations. See “Risk Factors — If we fail to protect our intellectual property
rights or prevent the loss or misappropriation of our intellectual property rights, we may lose our
competitive edge and our brand, reputation and operations may be materially and adversely affected.”

As of March 31, 2017, our Group owned 27 registered domain names, including our official
website and domain names. We generally renew our domain name registrations once every year and
applications for their renewal are usually made approximately one to three months prior to expirations.
Under normal circumstances, the domain name registrations take effect immediately after the payment
of renewal fees. If any of our domain name registrations cannot be renewed for any reason, the domain
name registrar may deregister the relevant domain name.

As of March 31, 2017, our Group owned four copyrights which were registered with the State
Copyright Bureau of China. As of March 31, 2017, our Group owned 50 trademarks in various
categories registered with the China Trademark Office. In addition, our Group had 74 trademark
applications with the China Trademark Office in various categories that were pending as of March 31,
2017.

As of March 31, 2017, our Group had two patents registered with the State Intellectual Property
Office of China. We also had eight patent applications in relation to our Wujieshan system.

A party has alleged that our use of the characters “眾安” in our company name represents passing
off of their trade name in Hong Kong due to that party having the same Chinese characters in its
company name. We have been duly registered in Hong Kong as a non-Hong Kong company pursuant
to the Companies Ordinance and do not currently carry on any business in Hong Kong other than the
establishment and maintenance of a share transfer and registration office for our H Shares to be issued
pursuant to the Global Offering. We have registered our trade name for the purpose of carrying on our
business in Hong Kong as “ZA Online Fintech P & C” to minimize the possible risks of confusion with
names of companies registered prior to us in Hong Kong and whose name uses the characters

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“眾安”. After consulting with our Hong Kong legal counsel, we do not believe that this allegation will
have any material impact on us and our use of the characters “眾安” in our company name will not
expose us to material litigation risks due to the following reasons:

• as at the Latest Practicable Date, the adverse party alleging the above claim has not
registered any trademark in Hong Kong, including any incorporating the “眾安” characters;

• there are a number of companies registered under the Hong Kong companies register with
the Chinese characters “眾安” in their names and the claim of likelihood of confusion
specifically with respect to the name of the Company is therefore not justified;

• our English name “ZhongAn Online P & C Insurance Co., Ltd.” is readily distinguishable
from the adverse party’s English name and does not bear any similarity with its English
name;

• we do not carry on any business in Hong Kong other than the establishment and
maintenance of a share transfer and registration office for our H Shares to be issued
pursuant to the Global Offering and will carry on business in Hong Kong under the trade
name of “ZA Online Fintech P & C” for the purpose of establishing and maintaining the
share transfer and registration office. The trade name “ZA Online Fintech P & C” is readily
distinguishable from the adverse party’s Chinese and English names and will always be
used in conjunction with our company name. Any claim of likelihood of confusion is
therefore not justified.

We have also resolved to adopt the following mitigating measures:

(i) we carry on business in Hong Kong under the name “ZA Online Fintech P & C” as approved
by and registered with the Registrar of Companies in Hong Kong;

(ii) we only make reference to our name “眾安在綫財產保險股份有限公司” in Hong Kong as


registered in the PRC in our corporate communication documents in conjunction with the
trade name “ZA Online Fintech P & C”;

(iii) we will adopt measures (such as putting prominent notices on the website of our Company)
to ensure that our Company is properly referred to as a PRC incorporated company carrying
on business in Hong Kong as “ZA Online Fintech P & C”; and

(iv) we intend to register the trademark for “ZA Online Fintech P & C” to better protect our
right to use this trade name in Hong Kong.

Other than as disclosed in the section headed “Risk Factors”, we did not have any material
dispute or any other pending legal proceedings of intellectual property rights with third parties during
the Track Record Period and up to the Latest Practicable Date.

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EMPLOYEES

As of December 31, 2014, 2015, 2016 and March 31, 2017, we had 184, 665, 1,574 and 1,698
full-time employees, respectively. As of March 31, 2017, 1,313 of our employees are primarily based
at our headquarters in Shanghai, China, 130 of our employees are based in Hangzhou, China, 113 of
our employees are primarily based in Beijing, China, 5 of our employees are primarily based in
Guangzhou, China, and 137 of our employees are primarily based in Shenzhen, China. The following
table sets forth the number of our employees by function as of March 31, 2017:

Number of
Function Employees % of Total

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 888 52.3


Product Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 23.4
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 7.1
Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 9.0
Sales and Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 5.2
General administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 3.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,698 100.0

Our success depends on our ability to attract, retain and motivate qualified personnel. As part of
our human resources strategy, we offer employees competitive salaries, performance-based cash
bonuses and other incentives. As a result, we have successfully attracted and retained our core
employees since our inception. More than 40% and 30% of our employees had prior experience in
large internet companies and financial institutions, respectively.

We primarily recruit our employees in China through recruitment agencies, on-campus job fairs
and online channels including our corporate website and social networking platforms. We have
adopted a training policy, pursuant to which management, technology and other trainings are regularly
provided to our employees by internally sourced speakers or externally hired consultants. Our
employees may also attend external trainings upon their supervisors’ approvals. We believe our lean
structure and corporate culture have contributed to our ability to recruit and retain qualified
employees.

As required under PRC regulations, we participate in various employee social security plans that
are organized by applicable local municipal and provincial governments, including housing, pension,
medical, work-related injury and unemployment benefit plans. We are required under PRC laws to
make contributions to employee benefit plans at specified percentages of the salaries, bonuses a
certain allowances of our employees, up to a maximum amount specified by the local government from
time to time. Bonuses are generally discretionary and based in part on employee performance and in
part on the overall performance of our business.

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We believe that we maintain a good working relationship with our employees and we had not
experienced any material labor disputes or any difficulty in recruiting staff for our operations during
the Track Record Period and up to the Latest Practicable Date.

COMPETITION

Although we believe we are not in direct competition with any specific Insuretech companies in
China, we face certain competition with internet companies and traditional insurance companies in
each of our business segments, as described below. For additional details regarding competitive
landscape of the industries in which we operate, see the section headed “Industry Overview”. See
“Risk Factors — Risk Relating to Our Business — We historically derived a majority of our total
income through partnering with our shareholders and their related parties, and the synergy value and
cross-selling effect we can get from them may decrease in the future. Some of our shareholders and
related parties offer competing products to ours”. — We face intense competition in the PRC online
insurance industry from both traditional insurance companies and other internet companies, which
could lead to adverse pricing pressure, reduced operating margins, loss of market share, departures of
qualified employees and increased capital expenditures. — Our business model may be replicated
quickly by other internet companies as well as traditional insurance companies and other financial
institutions aiming to engage in Insuretech business” for further information.

The following three segments of Insuretech have distinct competitive landscapes, while we are
mostly competitive in the innovative segments of technology enabled upgrade and, particularly,
ecosystem-oriented innovation.

Online distribution segment

We sell all of our products online and our property and casualty insurance products compete
primarily with major traditional insurers in China, who are the major players in the market that
dominate the online distribution of property & casualty insurance. Certain of these companies may
have substantial market presence, diversified product lines, well-established supply and distribution
systems, strong worldwide brand recognition and significant financial, marketing, research and
development and other resources. However, we believe our customer-centric products in
scenario-based settings and our strong cloud-based core system, artificial intelligence and big-data
analytics capabilities set us apart from our competitors.

We believe that we, as an innovative and fast-growing Insuretech company, are likely to have a
competitive advantage over the traditional insurance competitors as a result of our entrepreneurial
initiative and history and capabilities in developing ecosystem-oriented insurance products for
customers in the fast-evolving market as well as the experience in serving customers in this regard.

Technology enabled upgrade segment

Our products require us to devote tremendous amount of efforts in technology development and
upgrade in order to design and promote new products quickly to address our customers’ fast-changing
and multi-dimensional needs. Internet companies may have more technical resources than we do and

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may be able to devote greater resources to the development, promotion, sale and support of their
platforms and products. They may also have more extensive loyal customer bases, greater brand
recognition and broader customer relationships than we have. As such, they may be better in
developing new products and solutions, responding more quickly to new technologies and undertaking
more extensive marketing campaigns. Hence, our ecosystem partners may prefer products and
solutions that our competitors develop or introduce compared to the ones we offer, and competition
could result in reduced cooperation between our ecosystem partners and us.

Traditional insurance companies are also increasing its capital and resources in technology
perspective so as to compete against us in launching innovative and customer-centric insurance
products. For example, certain traditional insurance companies have adopted telematics to improve
auto insurance pricing methodology. We have created certain disruptive insurance products by using
innovative technologies that we developed, such as offering customized health insurance to our
customers based on biometric data collected from wearable devices, DNA testing or other sources. We
believe our continuous devotion in technology development and upgrade, accumulated knowledge and
experience in operating in Insuretech market enables us to respond to the fast-evolving market and
differentiate us from our competitors.

Ecosystem-oriented innovation segment

We face competition from other online insurance companies in China in the ecosystem-oriented
innovation segment. All these competitors possess strong technology backgrounds, and tend to have
stronger ability to develop insights from large amounts of customer data than traditional insurers. In
the meantime, some traditional insurers are also making investments to capture ecosystem related
opportunities, but they may face challenges in dealing with the conflict between their traditional
business and innovative online insurance business.

According to the Oliver Wyman Report, so far there are four licensed online insurance companies
in China. Among these existing companies, we obtained our online insurance license in October 2013,
more than two years earlier than any of the other three companies. We are also a leader among these
four companies in terms of GWP. Our GWP was more than three times the combined GWP of the other
three companies in 2016, based on their filings with the CIRC. The ecosystem-oriented innovation
segment is becoming more populated as increasingly more traditional insurers are able to utilize
technology to provide similar products.

PROPERTIES

As of March 31, 2017, we operated our businesses through 18 leased properties in Shanghai,
Hangzhou, Beijing, Shenzhen and Guangzhou in China. Our leased properties in China serve as our
offices, research and development centers, and customer service centers. Our leased properties have
a total gross floor area of approximately 22,614.68 square meters, and range from a gross floor area
of approximately 28 square meters to 6,120.74 square meters. The relevant lease agreements have
lease expiration dates ranging from January 2017 to July 2025 with renewal options. These properties

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are used for non-property activities as defined under Rule 5.01(2) of the Listing Rules and are
principally used as office premises for our business operations. We believe that, given that there is
sufficient supply of properties in the cities in which we have offices, we do not rely on the existing
leases for our business operations.

Pursuant to the applicable PRC laws and regulations, property lease contracts must be registered
with the local branch of the Ministry of Housing and Urban Development of the PRC. As of March
31, 2017, we failed to register 13 leases, primarily due to the difficulty of cooperating with the lessors
to register such leases. We are in the process of registering the required leases with the local branch
of the Ministry of Housing and Urban Development of the PRC. However, this will require the
cooperation of both tenants and landlords. We will take all practicable and reasonable steps to ensure
that such leases are registered. Our PRC Legal Advisor has advised us that the lack of registration of
the lease contracts will not affect the validity of the lease agreements under PRC law, and has also
advised us that a maximum penalty of RMB10,000 may be imposed for non-registration of each lease.
The estimated total maximum penalty is RMB130,000. In addition, as of March 31, 2017, five owners
of our leased property failed to provide relevant title certificate. If any of our lease is terminated or
void as a result of challenges from third parties or the government, we would need to seek alternative
premises.

We use these properties that may face potential challenges by the relevant governmental
authorities due to the lack of registration of the lease contracts or have potential title defects as office
premises for our business operations. However, even if we experience temporary interruption to our
usage of any of these leased office space, we believe that our employees can continue to perform the
materials aspects of their duties remotely given that our offices do not carry out any production,
manufacturing or physical retail activities, and our offices in other locations can adequately support
the functioning of our business operations in areas where we experience temporary office space
interruption. In addition, all our leased properties are located in major cities in China and we operate
our business mostly through technology infrastructure. In the event that a relocation is required, we
believe that we will be able to relocate our office premises quickly without incurring material
relocation costs because there is sufficient supply of alternative properties in those major cities
offering similar rents and facilities as the office premises we are using now.

According to section 6(2) of the Companies Ordinance (Exemption of Companies and


Prospectuses from Compliance with Provisions) Notice, this prospectus is exempted from compliance
with the requirements of section 342(1)(b) of the Companies Ordinance, which requires a valuation
report with respect to all our interests in land or buildings, for the reason that as of December 31,
2016, each of our property interests has a carrying amount below 15% of our consolidated total assets.

RESERVES

The following discussion relates to the determination of our reserves for purposes of our
consolidated financial statements included in the Accountant’s Report set forth in Appendix I, which
are prepared in accordance with HKFRS.

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Claim Reserves

When claims are made by or against our policyholders, any amount that our insurance business
pays or expects to pay the claimant are referred to as losses, and the costs of investigating, resolving
and processing these claims are referred to as loss adjustment expenses (“LAE”). We divide our
products based on risk nature and data reliability and establish claim reserves (“Claim Reserves”) for
payment of losses and LAE for claims that arise under our property and casualty insurance products
by product lines. These reserves are determined based on actuarial assumptions, appropriate actuarial
methods and models, historical loss experience and adjustments for future trends.

Our claim reserves are segmented into three major categories: reserves for incurred and reported
claims, IBNR reserves and loss adjustment expenses reserves. Reserves for incurred and reported
claims are based on estimates of future payments that will be made in respect of claims, including
expenses relating to such claims, and will not be higher than the sum insured. These estimates are
made using case estimate method or payment per claim incurred method, based on the facts and
circumstances at the time the reserves are established. We also consider historic trends of disposition
patterns and loss payments, levels of pending unpaid claims and types of coverage. In addition,
judicial decisions, economic conditions and public attitudes affect the estimation of reserves, as well
as the ultimate costs of claims.

IBNR reserves are established to recognize the estimated cost of losses for claims that have been
incurred but not yet known or fully considered by our claim settlement teams, including the possible
losses for claims that have been incurred but not yet reported to us, the possible losses for claims that
have been incurred and reported to us but not yet filed, the losses for claims that have been filed with
an overestimated or underestimated amount and the possible losses for claims that have been settled
but may need to be re-filed in the future. We establish these reserves, like the reserves for incurred
and reported claims, to recognize the estimated costs and related expenses necessary to settle such
claims. We rely on past experience adjusted for current trends and other factors that would modify past
experience to estimate our IBNR liability. These reserves are estimates that involve actuarial and
statistical projections of the expected cost of the ultimate settlement and claim settlement expenses.
We base our analyses on facts and circumstances known at the time, predictions of future events,
estimates of future inflation and other societal and economic factors. In addition, we consider other
factors in projecting our IBNR reserve, such as reported claim trends, claim severity, exposure growth
and future inflation. We review and revise these reserves periodically as additional information
becomes available and actual claims are reported.

The time required to learn of and settle claims is also an important consideration in establishing
reserves. Short-tail claims, such as motor vehicle and property damage claims, are reported within a
few days or weeks and are generally settled within several weeks, while long-tail claims can take years
to complete. For long-tail claims, due to the nature of the loss, information concerning the event may
not be readily obtainable. In addition, the analysis of long-tail losses is generally more difficult,
requires more detailed work and is subject to greater uncertainty. As of March 31, 2017, we did not
have any material long-tail claims and the average duration of our unsettled insurance liabilities was
shorter than one year.

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The ultimate cost of loss and LAE is subject to a number of highly variable circumstances. As
time passes between the report of a claim and the final settlement of the claim, circumstances could
change that may require established reserves to be adjusted. Factors such as changes in the legal
environment, results of litigation and changes in medical costs, costs of motor vehicle and repair
materials and labor rates could substantially impact claim costs. These factors may cause actual
developments to vary from expectations. We review and update claim reserve estimates periodically,
using the most current information available to management, and reflect any adjustments resulting
from changes in reserve estimates in our results of operations. Based on our internal procedures and
currently available information, management believes that our claim reserves are reasonable.
However, the establishment of claim reserves is an inherently uncertain process, and ultimate losses
may differ from our initial estimates. See the section entitled “Risk Factors — Risks Relating to Our
Business — Differences in actual benefits and claims from the assumptions used in pricing and
charging reserves for our insurance products may materially and adversely affect our results of
operations and financial condition.”

For details of our claim reserve development during the Track Record Period and up to March
31, 2017, see Note 3.2 to the Accountant’s Report set forth in Appendix I to this prospectus.

Unearned Premium Reserves

Unearned premium reserves are provided for our unexpired insurance obligations under our
insurance contracts. Unearned premium reserves are measured using the unearned premium approach.
At inception of the insurance contracts, unearned premium reserves are measured based on written
premiums, with deductions made for commissions, business tax and surcharges, insurance guarantee
fund, regulatory charges and other incremental costs. Subsequent to the initial recognition, unearned
premium reserves are released on a risk base according to the insurance coverage period and earned
premiums are recognized.

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BUSINESS

LICENSES, PERMITS AND APPROVAL

Our Directors, as advised by our PRC Legal Advisor, confirm that as of the Latest Practicable
Date, we had obtained all requisite licenses, approvals and permits from the relevant government
authorities that are material for our business operations in China. The following table sets forth details
of our material licenses and permits:

Expiration Description of the


License/Permit Holder Grant Dates Dates License/Permit

Insurance Company Our June 24, — Enterprise/individual


Legal Entity Certificate Company 2015 property insurance
directly related to internet
transactions, cargo
insurance, liability
insurance, credit
guarantee insurance,
short-term health/accident
insurance, auto insurance,
including mandatory
vehicle accident insurance
and vehicle commercial
insurance, reinsurance
business related to the
above business, business
allowed by national laws
and regulations to utilize
insurance funds,
insurance information
service business and other
business allowed by
CIRC

Our insurance products are currently all targeted at customers located in the PRC. Each of our
insurance products are based on product terms approved by the CIRC and the terms and conditions of
our insurance policies are all governed by the laws of the PRC. We do not currently carry on an
insurance business in or from Hong Kong and, as such, have not applied for an insurance license
pursuant to the Insurance Ordinance (Chapter 41 of the Laws of Hong Kong) (the “Insurance
Ordinance”). Our Directors have consulted with Hong Kong legal counsel with respect to insurance
matters and understand that in determining whether activities constitute carrying on a business in
Hong Kong, a range of factors set out in the Guideline on the Use of Internet for Insurance Activities
(the “Guideline”) issued by the Insurance Authority pursuant to the Insurance Ordinance will be taken
into account. These factors include:

• whether advertisements are made in the local mass media;

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• whether promotional or publicity activities are conducted in Hong Kong;

• whether the sales materials as displayed on the internet are directed at a particular group
or groups of people residing in Hong Kong;

• whether the contents of the website appear to target people residing in Hong Kong;

• whether the website contains a prominent disclaimer clearly indicating that the insurance
products and services are not available to people residing in Hong Kong; and

• whether reasonable measures have been implemented to guard against the acceptance of
insurance applications from, or provision of insurance services to, people residing in Hong
Kong.

We have been advised that the absence of any one or more of the factors is not necessarily
determinative, and there is no precedent for how the Guideline will be interpreted and enforced. We
operate the online portal through which we sell insurance products from PRC-based servers, and do
not conduct any advertising, promotional or other marketing activities for our insurance products in
Hong Kong. Nevertheless, following our consultation with Hong Kong legal counsel with respect to
insurance matters, we have implemented the following additional control measures that we consider
reasonable for the purposes of ensuring that we are not perceived as carrying on an insurance business
in or from Hong Kong for the purposes of the Insurance Ordinance. Such measures include (i) ensuring
that our apps are not available in the Hong Kong app store; (ii) including a disclaimer in relation to
the products that we sell on the Tmall store that our insurance products are only sold to PRC residents
(excluding Hong Kong, Macau and Taiwan) or to residents of other countries for risks they undertake
while they are within the PRC (excluding Hong Kong, Macau and Taiwan), and (iii) including a term
in the policy for our flight accident insurance sold on Ctrip that it is only sold to PRC residents
(excluding Hong Kong. Macau and Taiwan) or to persons departing from an airport within the PRC
(excluding Hong Kong, Macau and Taiwan). Our Directors believe that the manner in which we
conduct our business and the various measures we have adopted are sufficient to ensure we are not,
and are not perceived to be, carrying on an insurance business in Hong Kong. We embed our insurance
products into our ecosystem partners’ platforms. As advised by our PRC Legal Advisor, we may be
liable for penalties if the actions of our ecosystem partners result in them being found to have carried
on business in contravention of PRC insurance regulations, and we are not permitted under PRC
insurance regulations to exclude any liability for any actions of our ecosystem partners in relation to
the dealings for the issue of a contract of insurance and insurance business relating to the contract.
In the event that our business evolves or is expected to evolve in such a manner as to necessitate an
insurance license issued pursuant to the Insurance Ordinance, we will apply for such license
accordingly.

Please also refer to the section headed “Risk Factors — If we are deemed by overseas
jurisdictions to be conducting insurance business, we may need to obtain licenses for our business
operation and insurance products in that jurisdiction.” for further details.

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BUSINESS

LEGAL AND REGULATORY PROCEEDINGS AND COMPLIANCE

General

During the Track Record Period and up to the Latest Practicable Date, we had not been involved
in any actual or pending legal, arbitration or administrative proceedings (including any bankruptcy or
receivership proceedings) that we believe would have a material adverse effect on our business, results
of operations, financial condition or reputation. There are no legal, arbitral or administrative
proceedings before any court current or pending against, or involving, the properties or the businesses
of our Company or to which any of the properties or members of our Company is a subject, which
would have a material adverse effect on our business, results of operations, financial condition or
reputation. However, we may from time to time become a party to various legal, arbitration or
administrative proceedings arising from the ordinary course of business.

Regulatory Inspections

The CIRC and other PRC government authorities, including SAT, NAO, SAIC, PBOC, the
Ministry of Human Resources and Social Security of the PRC and their affiliated institutions, from
time to time make inquiries and conduct on-site or off-site examinations or investigations concerning
our compliance with PRC laws and regulations, including inquiries, examinations or investigations in
respect of our financial position and business operations, solvency margin, tax payment and labor and
social welfare. Under the Administrative Regulations for Insurance Companies 《 ( 保險公司管理規
定》), the CIRC conducts both on-site and off-site inspections on insurance institutions. The on-site
inspections conducted by the CIRC or its local bureaux of an insurance institution may focus on the
company’s management, reserves, solvency margin, deployment of funds, financial position,
transactions with insurance intermediaries, appointment of senior management and other matters
which the CIRC considers to be material. As of the Latest Practicable Date, we were not aware of any
inspections or audits conducted by any PRC regulatory authorities which would have a material
adverse effect on our business, financial position, results of operations or prospects.

Administrative Proceedings and Non-Compliance

During the Track Record Period and up to the Latest Practicable Date, we did not commit any
material non-compliance of the laws or regulations, and we did not experience any systemic
non-compliance incidents, which taken as a whole, in the opinion of our Directors, are likely to have
a material and adverse effect on our business, financial condition or results of operations. During the
same periods, we also did not experience any non-compliance of the laws or regulations, which taken
as a whole, in the opinion of the Directors, reflects negatively on the ability or tendency of our
Company, the Directors or our senior management, to operate our business in a compliant manner. Our
PRC Legal Advisor is of the opinion that, we have complied with all relevant PRC laws and
regulations in all material respects during the Track Record Period and up to the Latest Practicable
Date.

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BUSINESS

Set forth below is a summary of our certain non-compliance matters during the Track Record
Period and up to the Latest Practicable Date, as well as rectification actions and preventive measures
that we have taken in respect of such matters:

Remedies and Rectification


Legal Consequences and Measures Taken to Prevent
Reasons for the Potential Maximum Future Breach and Ensure
Matters of Non-compliance Non-compliance Penalties On-going Compliance

1. In January 2017, the Failure to We have paid the We have conducted


CIRC issued an appropriately monitor penalty of internal investigation
administrative penalty and manage the RMB200,000. and ceased all rebate
with regards to our personnel in charge of to customers and
operations in auto sales and marketing of replaced the head of
insurance business the insurance product auto insurance
relating to in certain regions and business department.
inappropriate rebate to insufficient We made some
customers. understanding of internal reorganization
regional CIRC of our auto insurance
regulations. department by
allocating the
responsibility and
function of the staff
previously in charge
of marketing and
promotion activities to
the staff in charge of
direct sales and
improved the
corporate government
and performance of
our auto insurance
department to ensure
compliance. We also
requested Ping An to
delegate one to two
specialists in each
region where we
conduct business in
order to ensure the
local business is in
compliance with the
local CIRC
regulations.

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BUSINESS

Remedies and Rectification


Legal Consequences and Measures Taken to Prevent
Reasons for the Potential Maximum Future Breach and Ensure
Matters of Non-compliance Non-compliance Penalties On-going Compliance

2. In August 2014, the Defective product Cease the offering of We have conducted
CIRC issued a design. such insurance internal investigations
regulatory opinion products and and filed a written
letter with regards to rectification required. report of the
the Company’s investigation to the
improper pricing for No fine was imposed. CIRC. We ceased the
internet transaction offering of such
platform liability products until the
insurance and baggage reasonable premiums
loss insurance. have been adopted.
Since then, we have
designed insurance
products based on
lower profit rate and
higher expected risk
or loss to ensure
proper pricing. We
also collected product
data to adjust floating
price and reflect the
associated risks. We
have adopted internal
control protocol to
clarify the
responsibilities of
product managers,
legal professionals and
actuaries, and all
products are subject to
multiple levels of
review and approval
procedures.

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BUSINESS

Remedies and Rectification


Legal Consequences and Measures Taken to Prevent
Reasons for the Potential Maximum Future Breach and Ensure
Matters of Non-compliance Non-compliance Penalties On-going Compliance

3. In January 2015, the Insufficient or Cease the offering of We have conducted


CIRC investigated our inaccurate product such insurance internal investigations
senior management description or products and and filed a written
with regards to the disclosure. rectification required. report of the
Company’s product investigation to the
description of Flight No fine was imposed. CIRC. We ceased the
Delay Insurance and offering of such
risk disclosure of products until the
consumer finance sufficient and accurate
guarantee products. product descriptions
have been adopted. We
refined our internal
cross-review
procedures and
implemented our
training system for all
product development
personnel.

4. In July 2015, the Failure to submit Cease the offering of We have conducted
CIRC investigated our insurance products for such insurance internal investigations
senior management regulatory approval. products and and filed a written
with regards to the rectification required. report of the
Company’s automobile investigation to the
tires damage No fine was imposed. CIRC. We were
insurance. alerted that automobile
tires damage insurance
is categorized as
automobile insurance
and thus requires
regulatory approval.
We are preparing for
the submission of such
products for regulatory
approval.

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BUSINESS

In the opinion of our PRC Legal Advisor, none of the above administrative penalties and
regulatory measures will have a material adverse effect on our current business operations and
financial condition or will become a legal obstacle to our Global Offering. Considering the nature,
scale, reasons and potential impact of the non-compliance incidents disclosed in this section in this
prospectus, our Directors take the view that none of the non-compliance incidents had a material
adverse effect on our business, financial condition or results of operations during the Track Record
Period.

We have adopted internal control measures to prevent future non-compliance. We have


established a Product Development Committee, which consists of the head of our actuarial, risk
management, legal compliance, financial, business and operation departments, to ensure legal
compliance of our product design and development as well as risk control. We strive to strengthen and
improve the operational management of our various product lines through the supervision of the
business management committee of each of our business units. We have designed and adopted strict
internal procedures to ensure the compliance of our business operations with the relevant rules and
regulations. Our legal, financial and operational departments continually review the implementation
of our internal policies and measures to ensure our policies and implementation are effective and
sufficient for the prevention of any potential non-compliance, and will organize internal trainings if
any potential non-compliance or implementation shortfall is identified. In addition, our audit
department conducts internal annual audit of our business lines based on the requirements of relevant
rules and regulations so as to ensure that all activities are being carried out in accordance with our
compliance policy and procedures.

The Joint Sponsors concur with the Directors’ view that none of the non-compliance incidents
had a material adverse effect on our business, financial condition or results of operations during the
Track Record Period, having considered the implementation of the enhanced internal policies and
measures by us. However, we cannot predict the outcome of any pending or future examination,
investigation or litigation, we cannot assure you that any pending legal and regulatory matters will not
have a material adverse effect on our reputation, business, financial condition or results of operations
and we cannot assure you that any future litigation or regulatory proceeding will not have a material
adverse effect on our reputation, business, financial condition or operating results.

HEALTH, SAFETY AND ENVIRONMENTAL MATTERS

Due to the nature of our business, we do not currently have any material liabilities relating to
health, work safety and environment and do not expect we will incur any material liabilities in these
regards which could have any material adverse impact on our business and operating results. During
the Track Record Period and up to the Latest Practicable Date, we had not been subject to any fines
or other penalties due to non-compliance with health, safety or environmental regulations.

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DATA PRIVACY MATTERS

We collect certain personal data from our customers in the PRC in connection with our business
and operations. The PRC has strict regulations in place governing the collection and usage of personal
data. In particular, PRC data privacy laws require the data owner to consent to the data collection and
agree to its usage. When a customer registers an account on our online portal, he is required to confirm
that he has read and agreed to the terms and conditions of being an user of the portal, including the
terms set out in our data privacy statement. Our data privacy statement states that the collection and
usage of any personal data will be in accordance with PRC laws and regulations, and it also clearly
states that the personal data being collected can be used for purposes of data analysis and supporting
us to develop and to improve our insurance products. In addition, for customers who purchase our
insurance products through our ecosystem partner’s platforms, they need to consent to the ecosystem
partners’ data privacy statements or policies that allow these partners to share relevant data with us
in accordance with PRC laws and regulations as well as the ecosystem partners’ own data privacy
statements or policies. Our PRC Legal Adviser has advised us that we are in compliance with the
relevant PRC laws and regulations with respect to personal data collection and usage.

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FINANCIAL INFORMATION

You should read the following discussion and analysis with our audited consolidated financial
information,including the notes thereto, included in the Accountant’s Report in Appendix I to this
prospectus. Our consolidated financial information has been prepared in accordance with HKFRS.
The following discussion and analysis contain forward-looking statements that reflect our current
views with respect to future events and financial performance. These statements are based on our
assumptions and analysis in light of our experience and perception of historical trends, current
conditions and expected future developments, as well as other factors we believe are appropriate
under the circumstances. However, whether actual outcomes and developments will meet our
expectations and predictions depends on a number of risks and uncertainties. In evaluating our
business, you should carefully consider the information provided in this prospectus, including the
sections headed “Risk Factors” and “Business.” For the purpose of this section, unless the context
otherwise requires, references to 2014, 2015 and 2016 refer to our financial years ended December
31 of such years. Unless the context otherwise requires, financial information described in this
section is described on a consolidated basis.

OVERVIEW

We are an online-only Insuretech company in China. Leveraging our technology, we develop


ecosystem-oriented insurance products and solutions through scenario-based settings to better serve
hundreds of millions of customers. From our inception in October 2013 to March 31, 2017, we sold
over 8.2 billion insurance policies and served approximately 543 million policyholders and the
insured, ranking us as the largest insurer in China by these measures during this period according to
the Oliver Wyman Report. In addition, we are the largest online insurance company in China with a
GWP of RMB3,408.0 million in 2016.

Our mission is to redefine insurance value chain through developing connective ecosystems and
applying cutting-edge technologies. We primarily offer products in five ecosystems, including
lifestyle consumption ecosystem, consumer finance ecosystem, health ecosystem, auto ecosystem and
travel ecosystem.

We believe our proprietary infrastructure and technologies are critical to our success. We operate
our core insurance system on our proprietary cloud-based platform called Wujieshan. We have also
developed advanced artificial intelligence capabilities to optimize product features quickly to enhance
customer experience and strengthen risk management. We have accumulated extensive user data
originating from our large and expanding customer base and third-party data providers. The
application of our big data analytics throughout the insurance value chain enhances our results of
operations.

We have adopted a set of effective procedures that is consistent with industry best practice to
evaluate and manage risks. We have an experienced team comprised of risk, legal and compliance
professionals to oversee our risk management efforts. In addition, our data-driven risk management
system enables dynamic pricing and real-time risk tracking, which enable us to optimize our products
features.

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FINANCIAL INFORMATION

We experienced significant growth during the Track Record Period. Our GWP increased
significantly from RMB794.1 million in 2014 to RMB2,283.0 million in 2015, and further to
RMB3,408.0 million in 2016, and from RMB604.4 million for the three months ended March 31, 2016
to RMB1,030.4 million for the three months ended March 31, 2017. Our net premiums earned
increased significantly from RMB712.2 million in 2014 to RMB1,921.5 million 2015, and further to
RMB3,225.4 million in 2016, and from RMB569.2 million for the three months ended March 31, 2016
to RMB886.8 million for the three months ended March 31, 2017.

MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our results of operations have been, and are expected to continue to be, materially affected by
a number of factors, many of which are outside of our control, including the following:

Growth of the Insuretech Market in China

Our business benefits from the rapid growth of the Insuretech market in China. In recent years,
China’s economic growth has increasingly been driven by domestic consumption. Supported by the
rapid growth of internet penetration and, in particular, mobile internet, China has a booming internet
economy. According to the Oliver Wyman Report, the gross merchandise value of the online retail
market in China more than doubled in two years from RMB1.9 trillion in 2013 to RMB3.9 trillion in
2015. Under this background, insurance going online is a rising trend in China. In 2016, out of the
9.5 billion newly written policies collected by the CIRC, approximately 65% were sold online.
According to the Oliver Wyman Report, China’s Insuretech market, as measured by gross written
premiums, is expected to grow from RMB363 billion in 2016 to over RMB1,413 billion in 2021,
representing a CAGR of 31.2%. The most innovative Insuretech segment, ecosystem-oriented
innovation, is expected to grow particularly fast at a CAGR of 62.0% from 2016 to 2021, according
to the Oliver Wyman Report. Furthermore, the PRC government has provided clear support for the
Insuretech industry. For example, the CIRC has shown encouragement and support for innovative
insurance products and online distribution. See the section headed “Industry Overview” in this
prospectus for further detail. However, the PRC Insuretech market is still new and rapidly evolving.
Its future growth is affected by various factors beyond our control, and may not be as high or as
sustainable as we anticipate. See the section headed “Risk Factors — Risks Relating to Our Industry”.

Our Diversified and Growing Product Portfolio

We currently market and sell insurance products in cooperation with partners in five major
ecosystems, including lifestyle consumption, consumer finance, health, auto and travel. Within these
ecosystems, we offer a wide variety of insurance products. Our key product types are:

• accident insurance, with 44 insurance product terms as of March 31, 2017, mainly serving
the travel ecosystem;

• bond insurance, with 20 insurance product terms as of March 31, 2017, mainly serving the
lifestyle consumption and consumer finance ecosystems;

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FINANCIAL INFORMATION

• health insurance, with 73 insurance product terms as of March 31, 2017, mainly serving the
health ecosystem;

• liability insurance, with 38 insurance product terms as of March 31, 2017, mainly serving
the lifestyle consumption ecosystem;

• credit insurance, with 8 insurance product terms as of March 31, 2017, mainly serving the
consumer finance ecosystem; and

• Others (mainly including shipping return insurance), with 79 product terms as of March 31,
2017, mainly serving the lifestyle consumption ecosystem.

We have continually increased our product diversity to accommodate our customers’ needs in
recent years. Our gross written premiums grew at a CAGR of 107.2% from 2014 to 2016 and by 70.5%
from the three months ended March 31, 2016 to the three months ended March 31, 2017, but the
percentage of our total gross written premiums accounted for by shipping return insurance, which was
our first major product, decreased from 77.2% in 2014 to 56.9% in 2015 and 35.0% in 2016, and
further to 25.0% for the three months ended March 31, 2017. Each of our top product types described
above made a substantial contribution to our total gross written premiums in 2016 and the three
months ended March 31, 2017. For example, we recently increased our focus on health insurance. In
August 2016, we launched Personal Clinic Policy, which started to generate significant premiums in
its first year of launch. As a result, gross written premiums from health insurance increased from
RMB13.4 million in 2015 to RMB205.0 million in 2016, and from RMB10.9 million in the three
months ended March 31, 2016 to RMB154.9 million in the three months ended March 31, 2017.
However, the needs of our customers are continuously evolving and if we fail to continue to diversify
and adjust our product portfolio to satisfy their needs, we may not be able to grow our business as
expected and our business and result of operations may be materially and adversely affected.

Our Relationships with Ecosystem Partners

We cooperate with a large number of ecosystem partners to embed our insurance products into
their platforms and sell our policies to users of such platforms. In 2014, 2015 and 2016 and the three
months ended March 31, 2017, policies sold through the platforms of our ecosystem partners
accounted for 100.0%, 97.7%, 86.2% and 74.6%, respectively, of our gross written premiums in the
same periods. Since we launched our Shipping Return Policy in collaboration with Alibaba in
November 2013, the number of our ecosystem partners have expanded significantly. As of December
31, 2014, 2015 and 2016 and March 31, 2017, we had 20, 71, 177 and 199 ecosystem partners,
respectively. We have partnerships with many leading companies in China’s new economy, including,
among others, Alibaba, Ant Financial Group, Mogujie, Ctrip, Didi Chuxing, Xiaomi, Alipay and
Bestpay. In 2016 and the three months ended March 31, 2017, we further increased the number of our
partners and deepened cooperation with existing partners in the travel ecosystem. As a result, gross
written premiums from accident insurance, which was primarily travel-related, increased from
RMB282.8 million in 2015 to RMB982.2 million in 2016, and from RMB182.5 million in the three
months ended March 31, 2016 to RMB311.7 million in the three months ended March 31, 2017. We
plan to continue to develop relationships with new ecosystem partners and strengthen our relationships

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FINANCIAL INFORMATION

with existing ecosystem partners to further expand our ecosystem-oriented product offerings. On the
other hand, our extensive cooperation with our ecosystem partners exposes us to related risks. If our
ecosystem partners change their cooperation agreements with us, including reducing their purchase or
allocation of our insurance products or charge us higher fees for insurance products sold through their
platforms, or terminate their partnership with us, our business and result of operations may be
materially and adversely affected. See the section headed “Risk Factors — Risks Relating to Our
Business — We depend on our cooperation with our ecosystem partners and other participants in the
ecosystems. Our business might be affected if such partners do not continue to maintain their
relationship with us or by the operational failure of third-party ecosystem partners.”

Our Customer Base and Customer Satisfaction

Our results of operations depend on our ability to maintain and grow our large customer base.
The numbers of our customers and policies underwritten by us increased significantly during the Track
Record Period. From our inception in October 2013 through March 31, 2017, we served approximately
543 million policyholders and the insured, and sold 8.2 billion policies. The number of our customers
was calculated based on unique identity and contact information available to us.

The growth in our customer base and transaction volume per customer are largely affected by the
quality of our consumer service and claims experience. We strive to provide our customers with simple
and speedy services, such as flexible terms and online automated claims. Our customer complaint rate
was 1.34 per million policies in 2016, ranking the second lowest among the 60 PRC P&C insurance
companies ranked by the CIRC. We aim to foster customer loyalty and increase customer stickiness,
which are crucial to our sustainable growth. In 2016, 78% of our customers were served by our
products at least twice, and on average, each of our customers was served by 10.3 policies during the
year, increasing from 5.4 in 2014 and 8.3 in 2015.

However, customer preferences are constantly evolving. If we fail to introduce popular new
products and maintain high customer satisfaction, our business may be adversely affected. See the
section headed “Risk Factors — Risks Relating to Our Business — Our business is inherently subject
to the personal financial situation and preference of our customers, and thus may be materially and
adversely affected due to the reduction of the demand for our products and solutions caused by the
change of personal financial situation or preference of our customers.”

Performance of Our Investment Portfolio

The results of our operations, financial condition and future prospects are affected by the
performance of our investment portfolio. We had total investment assets of RMB1,149.6 million,
RMB7,706.0 million, RMB7,837.3 million and RMB7,737.7 million as of December 31, 2014, 2015
and 2016 and March 31, 2017, respectively. Our total investment yield was 7.3%, 12.6%, 1.8%, -2.9%
and -0.0% in 2014, 2015 and 2016 and the three months ended March 31, 2016 and 2017, respectively.
Total investment assets represented 83.9%, 95.5%, 84.0% and 90.4% of our total assets as of
December 31, 2014, 2015 and 2016 and March 31, 2017, respectively. See the section headed
“Business — Asset Management” for further detail.

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FINANCIAL INFORMATION

Under applicable PRC regulations, our insurance funds can be invested in, among others, bank
deposits, bonds, certain equity securities, security investment funds, certain other financial products
and real properties. In recent years, PRC regulatory authorities, including the CIRC, have significantly
expanded the asset categories in which PRC insurance companies are permitted to invest.
Nevertheless, our ability to diversify our investment portfolio is limited by restrictions on the amount
and percentage of the insurance funds that we can invest in some of these asset categories. For
example, our investment in equity assets may not have a total book value of more than 30% of our total
assets at the end of the previous quarter, and our investment in overseas assets may not have a total
value of more than 15% of our total assets at the end of the previous quarter. See “Regulatory
Overview — Deployment of Insurance Funds”.

Due to our limited ability to diversify our investments, we are particularly exposed to
fluctuations in the PRC bond and equity markets, which could result in investment impairments
adversely affecting our results of operations. The PRC securities markets remain at an early stage of
development with evolving regulatory, accounting and disclosure requirements. The development of
the PRC securities markets may be significantly affected by changes in laws, rules, regulations and
government policies in the PRC. Furthermore, any potential market and economic downturns or other
uncertainties in the PRC, its neighboring countries or regions or the rest of the world may exacerbate
the risks relating to the PRC securities markets. These and other factors may from time to time result
in unexpected losses, lack of liquidity, substantial fluctuations in the prices and trading volumes of
listed securities compared to more mature securities markets in the world, such as those in the United
States and Europe. See the section headed “Risk Factors — Risks Relating to Our Business — Our
investment portfolio is subject to volatility of the PRC securities market and may expose us to unrated
instruments and illiquid assets risk, and the investment assets may experience sharp declines in their
returns or suffer significant losses, which would have a material adverse effect on our results of
operations and financial condition.”

Net Claims Incurred

Net claims incurred represents insurance claims paid less claims paid ceded to reinsurers, as
adjusted by net change in claim reserves. Our loss ratio, defined as net claims incurred as a percentage
of net premiums earned, decreased from 73.4% in 2014 to 68.5% in 2015, and further to 42.0% in
2016, and from 46.7% in the three months ended March 31, 2016 to 44.7% in the three months ended
March 31, 2017. Net claims incurred are affected by the frequency and amount of claims. To control
our claims incurred effectively, we combine actuarial science with big data technology to enhance
product pricing and quantify risk correlations. Our integrated technology platform allows us to
accurately identify fraudulent claims. However, net claims incurred may be affected by market
conditions. Major catastrophic events, such as those causing large-scale transportation delays, could
also lead to volatility in our claims incurred.

Our net claims incurred is affected by our product mix, which affects our profitability as
different product types tend to have different loss ratios. For example, our accident insurance and
health insurance, on average, both have significantly lower loss ratios than our shipping return
insurance. The fast growth of these two product types reduced our overall loss ratio during the Track
Record Period.

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FINANCIAL INFORMATION

Based on our unaudited interim consolidated financial statements for the six months ended June
30, 2016 and 2017, which were reviewed by our reporting accountant, our loss ratio increased from
41.0% in the six months ended June 30, 2016 to 52.8% in the six months ended June 30, 2017,
primarily due to (i) significant increases in insurance claims paid and net increase in claim reserves
in relation to credit insurance, a product type that we started to focus on in 2017; and (ii) a significant
increase in our unearned premium reserves mainly due to the rapid growth of longer-term products
such as health insurance and credit insurance. As we continue to accumulate a large amount of user
and transaction data, we aim to further optimize our pricing and further improve our risk management
capability, thereby stabilizing and improving our loss ratio.

Our Operating Expenses

We believe that our internet-centric, data-driven business model gives us a significant edge in
operational efficiency throughout the insurance lifecycle, from product development, pricing and
underwriting, sales and marketing to claims settlement. Our extensive cooperation with ecosystem
partners also reduces our customer acquisition costs. Our expense ratio was 35.2%, 58.1%, 62.7%,
65.6% and 78.4% in 2014, 2015 and 2016 and the three months ended March 31, 2016 and 2017,
respectively. The largest components of our operating expenses are consulting fees and service
charges, and handling charges and commissions. Consulting fees and service charges are primarily
fees paid to our ecosystem partners in connection with sales of our policies through their platforms.
Factors affecting the consulting fees and service charges depend on the cooperation with various
ecosystem partners, which include fixed or variable fee rates charged, and could be affected by claims
incurred and loss ratios, among others. In 2014, 2015 and 2016 and the three months ended March 31,
2016 and 2017, consulting fees and service charges accounted for 13.3%, 30.7%, 33.9%, 35.4% and
38.1%, respectively, of our net premiums earned. Handling charges and commissions are fees paid to
insurance agents for the distribution of our policies. In 2014, 2015 and 2016 and the three months
ended March 31, 2016 and 2017, handling charges and commissions accounted for 2.3%, 5.2%, 8.9%,
7.8% and 13.0%, respectively, of our net premiums earned. Expanding into new product types are
typically associated with a significant amount of operating expenses in the initial years. We aim to
adjust our product mix in order to reduce insurance operating expenses, mainly handling charges and
commissions and consulting fees and service charges. We plan to continue to increase our focus on
health insurance and credit insurance, both of which had lower rates of insurance operating expenses
than our other types of insurance products during the Track Record Period. We intend to increase sales
through our proprietary platform by offering products such as the annual package of Flight Delay
Policy targeting frequent travelers. We also plan to deepen our cooperation with smaller ecosystem
partners, which are expected to charge lower rates of handling charges and commissions, and
consulting fees and service charges than our larger ecosystem partners.

As an Insuretech company, we have made and intend to continue to make significant investments
in research and development. In 2014, 2015 and 2016 and the three months ended March 31, 2016 and
2017, our research and development investments were RMB22.4 million, RMB63.9 million,
RMB214.4 million, RMB34.5 million and RMB91.7 million, respectively, representing 2.8%, 2.8%,
6.3%, 5.7% and 8.9%, respectively, of our GWP in the same periods. In July 2016, we established a
wholly-owned subsidiary that focuses on the research and development of cutting-edge internet
technologies. See the section headed “Business — Our Technology Solutions Business” for further
detail. We expect to incur substantial research and development expenses and capital expenditures in

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FINANCIAL INFORMATION

connection with our technology solutions business. In the long run, however, we expect this business
to be our new growth driver. Furthermore, as our business continues to expand, the increase in our
research and development expenses is likely to be partially offset by our increasing economies of scale
and improving operational efficiency.

We aim to adjust our product mix in order to reduce handling charges and commissions and
consulting fees and service charges. In addition, the growth in our headcount is expected to slow down
as we continue to expand our businesses and benefit from increasing economies of scale. In the
medium to long term, combined with our effort to further improve our loss ratio, we aim to lower our
combined ratio to under 100% and realize an underwriting profit.

Regulatory Environment

We are subject to the regulatory oversight of a number of financial services, insurance and
related regulators, as described in the section headed “Regulatory Overview” in this prospectus. These
regulators have broad authority over our business, including our capital requirements, where we are
authorized to operate and our ability to enter certain new lines of business, expand our operations,
offer new products, enter into distribution arrangements and declare dividends. These regulators
oversee our operations and, as a result of this broad and diverse oversight, we are occasionally subject
to overlapping, conflicting and/or increased regulation. Our efforts to comply with changes in
regulations may lead to increased operating and administrative expenses. In addition, pursuant to the
insurance laws, rules and regulations of the various geographical markets in which we operate, we are
restricted to a specified range of investment activities. These restrictions may limit our ability to
diversify investment risks and improve returns on our investment portfolio, thereby affecting our
results of operations as well as liquidity and solvency positions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Some of our accounting policies require us to apply estimates and assumptions as well as
complex judgments relating to accounting items. The estimates and assumptions we use and the
judgments we make in applying our accounting policies have a significant impact on our financial
position and operating results. Our management continually evaluates such estimates, assumptions and
judgments based on past experience and other factors, including industry practices and expectations
of future events that are believed to be reasonable under the circumstances. There has not been any
material deviation between our management’s estimates or assumptions and actual results, and we
have not made any material changes to these estimates or assumptions during the Track Record Period.
We do not expect any material changes in these estimates and assumptions in the foreseeable future.

We set forth below those accounting policies that we believe are of critical importance to us or
involve the most significant estimates, assumptions and judgments used in the preparation of our
financial statements. Our significant accounting policies, estimates, assumptions and judgments,
which are important for understanding our financial condition and results of operations, are set forth
in detail in Notes 2 and 3 to the Accountant’s Report included in Appendix I to this prospectus. See
Note 2.1 to the Accountant’s Report included in Appendix I to this prospectus for a list of standards,
amendments and interpretations that have been issued but not yet effective as of January 1, 2017, and
their potential impact on our accounting policies and reported results.

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FINANCIAL INFORMATION

Revenue Recognition

Revenue is recognized when it is probable that the economic benefits will flow to the Group and
when the revenue can be measured reliably, on the following bases:

Premium revenue

Premium revenue is recognized when the insurance contracts are issued and the related insurance
risk is undertaken by the Group, the economic benefits associated with the insurance contracts will
probably flow to the Group and when the revenue can be measured reliably.

Premiums from direct insurance contracts are recognized as revenue based on the amount of total
premiums stated in the contracts.

Interest income

Interest income is recognized on an accrual basis using the effective interest rate method by
applying the rate that discounts the estimated future cash receipts through the expected life of the
financial instrument to the net carrying amount of the financial asset.

Dividend income

Dividend income is recognized when the right to receive payment is established.

Share-based Payments

The Group operates an equity-settled, share-based compensation plan, under which the Group
receives services from employees as consideration for equity instruments (restricted share) of the
Group. The fair value of the employee services received in exchange for the grant of the share is
recognized as an expense. The total amount to be expensed is determined by reference to the fair value
of the share granted:

• Including any market performance conditions;

• Excluding the impact of any service and non-market performance vesting conditions;

• Including the impact of any non-vesting conditions.

At the end of each reporting period, the group revises its estimates of the number of equity
instruments that are expected to vest based on the non-marketing performance and service conditions.
It recognizes the impact of the revision to original estimates, if any, in the income statement, with a
corresponding adjustment to equity.

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FINANCIAL INFORMATION

If the terms of an equity-settled award are modified, at a minimum an expense is recognized as


if the terms had not been modified. An additional expense is recognized for any modification that
increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the
employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation,


and any expense not yet recognized for the award is recognized immediately. However, if a new award
is substituted for the cancelled award, and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they were a modification of the original award,
as described in the previous paragraph.

Intangible Assets

The Group’s intangible assets include computer software and Chinese domain name registration.
Intangible assets can be recognized only when future economic benefits expected to be obtained from
the use of the item will flow into the Group and its cost can be measured reliably. Intangible assets
acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired
in a business combination is the fair value as at the date of acquisition.

Costs associated with maintaining computer software programs are recognized as an expense as
incurred. Development costs that are directly attributable to the design and testing of identifiable and
unique software products controlled by the Group are recognized as intangible assets when the
following criteria are met:

• It is technically feasible to complete the software product so that it will be available for
use;

• Management intends to complete the software product and use or sell it;

• There is an ability to use or sell the software product;

• It can be demonstrated how the software product will generate probable future economic
benefits;

• Adequate technical, financial and other resources to complete the development and to use
or sell the software product are available; and

• The expenditure attributable to the software product during its development can be reliably
measured.

Directly attributable costs that are capitalized as part of the software product include the
software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognized as an expense as
incurred. Development costs previously recognized as an expense are not recognized as an asset in a
subsequent period.

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FINANCIAL INFORMATION

The useful lives of intangible assets are assessed by the period of bringing economic benefits for
the Company. If the period of bringing economic benefits cannot be determined, intangible assets will
be classified as indefinite intangible assets.

Intangible assets with finite lives are subsequently amortized on the straight-line basis over the
useful economic life. The amortization period and the amortization method for an intangible asset with
a finite useful life are reviewed, and adjusted if appropriate, at least at each year end.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement
is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or
liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

For financial instruments where there is no active market, fair value is determined using
valuation techniques. Such techniques include using recent arm’s length market transactions;
reference to the current market value of another instrument which is substantially the same; a
discounted cash flow analysis; and other valuation models. For discounted cash flow techniques,
estimated future cash flows are based on directors’ best estimates and the discount rate used is a
market related rate for a similar instrument. Certain financial instruments, including derivative
financial instruments, are valued using pricing models that consider, among other factors, contractual
and market prices, correlation, time value of money, credit risk, yield curve volatility factors and/or
prepayment rates of the underlying positions. The use of different pricing models and assumptions
could produce materially different estimates of fair values.

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FINANCIAL INFORMATION

The fair values of floating rate and overnight deposits with credit institutions are their carrying
values. The carrying value is the cost of the deposit and accrued interest. The fair value of fixed
interest-bearing deposits is estimated using discounted cash flow techniques. Expected cash flows are
discounted at current market rates for similar instruments at the balance sheet date.

Impairment of Financial Assets

The Group assesses at the end of each reporting period whether there is objective evidence that
a financial asset or a group of financial assets is impaired.

Assets carried at amortized cost

If there is objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred). The related collateral
value shall also be taken into account. The present value of the estimated future cash flows is
discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate
computed at initial recognition or the current effective interest rate if a loan has a variable interest
rate).

The carrying amount of the asset is reduced either directly or through the use of an allowance
account and the amount of the loss is recognized in the income statement. Interest income continues
to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together
with any associated allowance are written off when there is no realistic prospect of future recovery.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases
because of an event occurring after the impairment was recognized, the previously recognized
impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later
recovered, the recovery is credited to the income statement.

Assets classified as available for sale

For debt securities, if any such evidence exists the cumulative loss — measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognized in profit or loss — is removed from equity and recognized in profit or loss. If,
in a subsequent period, the fair value of a debt instrument classified as available for sale increases and
the increase can be objectively related to an event occurring after the impairment loss was recognized
in profit or loss, the impairment loss is reversed through the consolidated income statement.

For equity investments, a significant or prolonged decline in the fair value of the security below
its cost is also evidence that the assets are impaired. If any such evidence exists the cumulative loss
— measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognized in profit or loss — is removed from
equity and recognized in profit or loss. Impairment losses recognized in the consolidated income
statement on equity instruments are not reversed through the consolidated income statement.

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FINANCIAL INFORMATION

Insurance Contracts

Insurance contracts are those contracts under which the Group has accepted significant insurance
risk from the policyholders by agreeing to compensate the policyholders if a specified uncertain future
event (the insured event) adversely affects the policyholders. Insurance contracts are classified as
direct insurance contracts and reinsurance contracts. The significance of insurance risk as determined
by the Group is dependent on both the probability of an insurance event and the magnitude of its
potential effect.

Contracts that only transfer insurance risk are treated as insurance contracts. If the Group signs
contracts with policyholders which transfer insurance risk as well as other risks, the treatments would
depend on:

• If the insurance risk portion and other risk portion are distinct and separately measurable,
the insurance risk portion and other risk portion should be unbundled. The portion with
insurance risk should be treated as an insurance contract, while the portion with other risks
should not be treated as an insurance contract.

• If the insurance risk portion and other risk portion cannot be distinct, or if they are distinct
but cannot be separately measurable, the whole contract should be treated as an insurance
contract if the insurance risk is significant; the whole contract should not be treated as an
insurance contract if the insurance risk is insignificant.

Testing of Significance of Insurance Risk

For contracts issued by the Group which require testing the significance of insurance risk, it
should be performed at the initial recognition of such contracts, and based on a group of contracts with
a similar nature.

When testing the significance of insurance risk, the Group makes judgements in this sequence:
(i) whether the contract transfers insurance risk; (ii) whether the contract has commercial substance;
(iii) whether the insurance risk transferred is significant.

When determining whether the contracts (or policies) transfer significant insurance risk, the
Group considers: (i) annuity contracts that transfer longevity risk are treated as insurance contracts;
(ii) for non-annuity contracts, if the insurance risk ratio is greater than or equal to 5% at certain points
of time during the duration of the contracts, they are treated as insurance contracts; the insurance risk
ratio is derived by comparing the benefits paid with the benefits payable if the insured event did not
occur. For property and casualty and short-term life policies that obviously transfer significant risk,
the Group recognizes them as insurance contracts directly.

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FINANCIAL INFORMATION

When determining whether reinsurance policies transfer significant insurance risk, the Group
considers thoroughly the commercial substance and other relevant contracts and agreements, and if the
insurance risk ratio of reinsurance policies is greater than 1%, they are treated as reinsurance
contracts. The insurance risk ratio of reinsurance policies is derived by comparing the present value
of probability-weighted expected loss with the present value of expected reinsurance premiums. If the
reinsurance policies obviously transfer significant insurance risk, the Group directly recognizes them
as reinsurance contracts.

For the purpose of testing the significance of insurance risk, contracts of a similar nature are
grouped together. Through considering the risk distribution and characteristics, the Group selects
sufficient representative samples to test the significance of insurance risk. If most samples transfer
significant insurance risk, all contracts in the group are treated as insurance contracts.

The assumptions used for testing the significance of insurance risk mainly include loss ratio, loss
distribution, etc. The Group determines such assumptions based on historical experiences and the
estimation on future development trends so as to reflect the Group’s product characters and actual
claim payments.

Insurance Contract Liabilities

The Company’s insurance contract liabilities include unearned premium reserves and claim
incurred reserves.

When measuring insurance contract liabilities, insurance contracts whose insurance risks are of
a similar nature are classified as a measurement unit. The company’s contracts mainly include credit
insurance, bond insurance, enterprise property insurance, household property insurance, health
insurance, accident insurance, liability insurance, cargo insurance, motor insurance and other
insurance.

Insurance contract liabilities are measured based on a reasonable estimate of the amount of
payments when the company fulfils relevant obligations under the insurance contracts, which
represents the difference between expected future cash outflows and inflows under such contracts.

• Expected future cash outflows represent reasonable cash outflows which are necessary for
the company to fulfill relevant obligations under the insurance contracts, and mainly
include: (a) guaranteed benefits or claims under the insurance contracts; (b) reasonable
expenses necessary for maintaining and serving the insurance contracts, claims handling,
including policy maintenance expenses, claim expenses, etc.

• Expected future cash inflows represent cash inflows from assuming insurance contractual
obligations, including premiums and other charges.

• Reasonable estimate of expected net future cash flows is determined based on information
currently available at the balance sheet date.

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FINANCIAL INFORMATION

• Margins are considered and separately measured in determining insurance contract


liabilities. Margins are released in the income statement over the insurance coverage period
using systematic and reasonable methods. Margins include risk margin and residual margin.

• Risk margin represents provision for the uncertainty associated with the future net cash
flows.

• At inception of an insurance contract, any “day-one” gain is not recognized in the income
statement, but included in the insurance contract liabilities as a residual margin. At
inception of an insurance contract, any “day-one” loss is recognized in the income
statements.

The Group amortizes the residual margin on a time basis during the whole insurance coverage
period and records it in profit or loss.

When measuring insurance contract liabilities, time value of money is considered. The related
future cash flows are discounted when the impact of time value of money is significant. For short
duration contracts which duration is within one year, the cash flows are not discounted. The discount
rate used in the measurement of time value of money is determined with reference to information
currently available as at the end of each reporting date and is not locked.

Unearned premium reserves

Unearned premium reserves are measured by using the unearned premium approach. At inception
of the contract, unearned premium reserves are measured based on premiums received with deduction
of relevant acquisition costs such as commission charge, business tax, insurance guarantee fund,
supervision fees, etc. After initial recognition, unearned premium reserves are released over the term
of the contract using a 365-day basis or other methods regarding to relevant nature and risk
distribution.

The Company performs liability adequacy tests using discounted cash flow method at the balance
sheet date. Additional insurance contract liabilities should be made and recognized in the income
statement if any deficiency exists.

Claim reserves

Claim reserves represent insurance contract provisions for non-life insurance accidents, which
include incurred and reported claim reserves, incurred but not reported claim reserves and claim
expense reserves.

Incurred and reported claim reserves represent insurance contract provisions for the claims
incurred and reported to the company. The company uses case-by-case estimate method to measure
incurred and reported claim reserves based on a reasonable estimate of the ultimate claims amount and
the margin factor.

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FINANCIAL INFORMATION

IBNR claim reserves represent insurance contract provisions for the claims incurred but not
reported to the Company. The Company uses loss ratio method and chain ladder method to measure
IBNR claim reserves based on a reasonable estimate of the ultimate claims amount and the margin
factor, and after considering industry benchmark and experience data, etc.

Claim expense reserves represent insurance contract provisions for related claims handling costs.
The Company uses case-by-case estimate method for direct claim expense reserves and ratio allocation
method to measure indirect claim expense reserves with consideration of margin factor.

Current and Deferred Income Tax

Income tax for the period comprises current and deferred income tax. Income tax is recognized
in the income statement, except to the extent that it relates to items recognized in other comprehensive
income or directly in equity. In this case, income tax is recognized in other comprehensive income or
directly in equity, respectively.

Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the Company’s subsidiaries operate and generate
taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation and establishes provisions
where appropriate.

Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, if the deferred income tax arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period
and are expected to apply when the related deferred income tax asset is realized or the deferred income
tax liability is settled.

Deferred income tax assets are recognized to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries,


except where the Group controls the timing of the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.

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FINANCIAL INFORMATION

The tax effects of carry-forwards of unused losses or unused tax credits are recognized as an
asset when it is probable that future taxable profits will be available against which these losses can
be utilized.

Deferred income tax related to fair value re-measurement of available-for-sale investments and
cash flow hedges, which are charged or credited directly in other comprehensive income, is also
credited or charged directly to other comprehensive income and subsequently recognized in the
consolidated income statement together with the deferred gain or loss.

CONSOLIDATED INCOME STATEMENTS

The following table sets forth our consolidated income statements with selected line items for the
periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,

2014 2015 2016 2016 2017

(in thousands of RMB)


(unaudited)

Gross written premiums . . . . . . . . . . . . . 794,097 2,283,042 3,408,048 604,401 1,030,363


Less: Premiums ceded to reinsurers . . . . (7,265) (10,443) (39,632) (3,516) (35,954)
Net written premiums. . . . . . . . . . . . . . . 786,832 2,272,599 3,368,416 600,885 994,409
Less: Net change in unearned premium
reserves . . . . . . . . . . . . . . . . . . . . . . . (74,647) (351,105) (143,004) (31,706) (107,632)
Net premiums earned . . . . . . . . . . . . . . 712,185 1,921,494 3,225,412 569,179 886,777
Net investment income . . . . . . . . . . . . . . 80,062 520,684 98,624 (167,093) 95,552
Net fair value gains through profit or
loss . . . . . . . . . . . . . . . . . . . . . . . . . . 9,914 40,611 41,843 (52,435) (96,555)
Other operating income . . . . . . . . . . . . . 15,376 26,556 46,841 204 10,120
Other income . . . . . . . . . . . . . . . . . . . . 105,352 587,851 187,308 (219,324) 9,117
Total income . . . . . . . . . . . . . . . . . . . . . 817,537 2,509,345 3,412,720 349,855 895,894
Net claims incurred . . . . . . . . . . . . .... (522,903) (1,316,269) (1,355,293) (265,555) (396,713)
Handling charges and commissions .... (16,154) (100,641) (287,109) (44,600) (115,465)
Finance costs . . . . . . . . . . . . . . . . . .... (5,702) (3,078) (203) (157) (445)
Other operating and administrative
expenses . . . . . . . . . . . . . . . . . . . .... (236,194) (1,029,764) (1,757,100) (333,235) (605,975)
Total benefits, claims and expenses . . (780,953) (2,449,752) (3,399,705) (643,547) (1,118,598)
Operating profit/(loss) before income
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,584 59,593 13,015 (293,692) (222,704)
Income tax expense . . . . . . . . . . . . . . . . 397 (15,336) (3,643) 38,307 20,608
Net profit/(loss) for the year/period. . . 36,981 44,257 9,372 (255,385) (202,096)

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FINANCIAL INFORMATION

DESCRIPTION OF MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS

We recorded an underwriting loss of RMB61.5 million, RMB511.6 million and RMB153.1


million, respectively, and our combined ratio was 108.6%, 126.6% and 104.7%, respectively. Our net
profit from 2014 to 2016 was mainly driven by our net investment income, which increased from
RMB80.1 million in 2014 to RMB520.7 million in 2015 and then decreased to RMB98.6 million in
2016. Our net investment income has fluctuated and will continue to fluctuate subject to the
performance of the PRC securities market.

Gross Written Premiums

Gross written premiums primarily include premiums written by us on insurance contracts issued
or renewed for a given period, without deduction for premiums ceded by us to reinsurers. We currently
market and sell eight types of insurance recognized by the CIRC, including:

• Accident insurance, including products such as Flight Accident and Delay Policy
(“航意航延險”) and Train Accident Policy (“火車意外險”), mainly serving the travel
ecosystem;

• Bond insurance, including products such as Zhong Le Bao (“眾樂寶”) and Can Ju Xian
(“參聚險”), mainly serving the lifestyle consumption and consumer finance ecosystems;

• Health insurance, including products such as Personal Clinic Policy (“尊享e生”) and Group
Health Insurance Plan (“健康團險計劃”), mainly serving the health ecosystem;

• Liability insurance, including products such as Phone Accident Policy (“手機意外險”) and
Logistics Liability Insurance (“物流責任險”), mainly serving the lifestyle consumption
ecosystem;

• Credit insurance, including products such as Mashanghua (“馬上花”), mainly serving the
consumer finance ecosystem;

• Cargo insurance, including products such as Taobao Free Return Policy (“放心淘”), mainly
serving the lifestyle consumption ecosystem;

• Household property insurance, including products such as General Screen Crack Policy
(“碎屏險”) and Account Safety Policy (“賬戶安全險”), mainly serving the lifestyle
consumption and consumer finance ecosystems; and

• Others, including products such as Shipping Return Policy (“退貨運費險”) and Generic
Buyer Version of Shipping Return Policy (“任性退”), mainly serving the lifestyle
consumption ecosystem.

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FINANCIAL INFORMATION

The table below sets forth a breakdown of our gross written premiums by type of insurance in
absolute amounts and as percentages of our total gross written premiums for the periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,

2014 2015 2016 2016 2017

RMB % RMB % RMB % RMB % RMB %

(in thousands, except percentages)


(unaudited)

Accident insurance . 44,391 5.6 282,783 12.4 982,228 28.8 182,519 30.2 311,682 30.3
Bond insurance . . . 108,929 13.7 453,290 19.8 517,613 15.2 108,808 18.0 84,208 8.2
Health insurance . . . 13 0.0 13,384 0.6 205,014 6.0 10,912 1.8 154,881 15.0
Liability insurance . 15,993 2.0 81,209 3.5 185,097 5.5 35,082 5.8 82,582 8.0
Credit insurance . . . 4,003 0.5 51,728 2.3 102,826 3.0 24,904 4.1 46,762 4.5
Cargo insurance . . . — — 15,682 0.7 59,304 1.7 5,322 0.9 18,343 1.8
Household property
insurance . . . . . 4,555 0.6 33,762 1.5 15,464 0.5 1,732 0.3 10,448 1.0
Others . . . . . . . . . 616,213 77.6 1,351,204 59.2 1,340,502 39.3 235,122 38.9 321,457 31.2
Of which:
Shipping return
insurance . . . . 613,145 77.2 1,298,219 56.9 1,193,562 35.0 206,092 34.1 257,814 25.0

Total . . . . . . . . . . 794,097 100.0 2,283,042 100.0 3,408,048 100.0 604,401 100.0 1,030,363 100.0

Note:

(1) The CIRC recognizes the following types of the property and casualty insurance products: accident insurance, bond
insurance, health insurance, liability insurance, credit insurance, cargo insurance, household property insurance and
others. Although shipping return insurance accounted for a significant percentage of our GWP during the Track Record
Period, it is categorized as “others” based on its policy terms in our periodic reports to the CIRC.

Premiums Ceded to Reinsurers

Premiums ceded to reinsurers represent the portion of gross written premiums ceded to
reinsurers, who, pursuant to the relevant reinsurance contracts, share part of the insured risk that we
have assumed under our insurance contracts. Our reinsurance arrangements are primarily in
connection with our health insurance products.

Net Written Premiums

Net written premiums represent gross written premiums less premiums ceded to reinsurers.

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FINANCIAL INFORMATION

Net Change in Unearned Premium Reserves

Net change in unearned premium reserves represents the change in unearned premium reserves,
which are portions of written premiums relating to unexpired risk of insurance coverage. Compared
with short-term insurance products, longer-term products generally lead to a larger amount of
unearned premium reserves. During the Track Record Period, our unearned premium reserves
increased significantly mainly due to the increase in our gross written premiums and the rapid growth
of longer-term products such as health insurance and credit insurance.

Net Premiums Earned

Net premiums earned represent net written premiums less net change in unearned premium
reserves.

Net Investment Income

Net investment income is comprised of interest income from trust products, term deposits,
securities purchased under agreements to resell and debt securities, dividend income from investment
funds and equity securities, and realized gains or losses on securities through profit or loss and
available-for-sale securities.

Net Fair Value Gains through Profit or Loss

Net fair value gains through profit or loss represent net fair value change on financial assets
measured at fair value through profit or loss.

Other Operating Income

Other operating income primarily includes government grants and advisory income.

Total Income

Total income represents the sum of net premiums earned, net investment income, net fair value
gains through profit or loss and other operating income.

Net Claims Incurred

Net claims incurred represent insurance claims paid less claims paid ceded to reinsurers, as
adjusted by net change in claim reserve.

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FINANCIAL INFORMATION

Handling Charges and Commissions

Handling charges and commissions represent fees paid to insurance agents for the distribution of
our policies. During the Track Record Period, we incurred a significant majority of our handling
charges and commissions in connection with our travel-related accident insurance.

Finance Costs

Finance costs represent interest paid on certain financial liabilities.

Other Operating and Administrative Expenses

Other operating and administrative expenses primarily include consulting fees and service
charges primarily paid to our ecosystem partners, employee salaries and benefits, promotion and
marketing expenses, office rentals and other related expenses, and other miscellaneous operating and
administrative expenses.

The table below sets forth a breakdown of our other operating and administrative expenses for
the periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,

2014 2015 2016 2016 2017

(in thousands of RMB)


(unaudited)

Consulting fees and service charges . . . . 94,462 590,629 1,092,868 201,381 338,061
Taxes and surcharges . . . . . . . . . . . . . . . 44,866 128,993 63,686 34,562 3,381
Employee benefit expense . . . . . . . . . . . 42,021 185,676 302,547 49,058 134,385
Rental fee . . . . . . . . . . . . . . . . . . . . . . . 11,461 24,687 53,542 10,451 22,032
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . 3,366 5,179 7,952 1,680 3,250
Amortization of intangible assets . . . . . . 871 3,302 17,425 2,305 10,733
Auditors’ remuneration. . . . . . . . . . . . . . 454 570 1,948 200 717
Others (1) . . . . . . . . . . . . . . . . . . . . . . . . 38,693 90,728 217,132 33,598 93,416
236,194 1,029,764 1,757,100 333,235 605,975

Note:
(1) Others included, among others, advertising and general publicity expenses, insurance guarantee fund and expenses for
maintenance of electronic devices.

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FINANCIAL INFORMATION

Income Tax Expense

Under the PRC EIT Law, the Company and its subsidiaries are subject to the statutory rate of
25%.

We do not have any disputes or unresolved tax issues with the relevant tax authorities.

PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

Gross written premiums

Gross written premiums increased by 70.5% from RMB604.4 million in the three months ended
March 31, 2016 to RMB1,030.4 million in the three months ended March 31, 2017, primarily due to
significant increases in gross written premiums from health insurance, accident insurance, liability
insurance and shipping return insurance, partially offset by a decrease in gross written premiums from
bond insurance.

Gross written premiums from health insurance increased from RMB10.9 million in the three
months ended March 31, 2016 to RMB154.9 million in the three months ended March 31, 2017,
primarily due to gross written premiums generated by Personal Clinic Policy, which was launched in
August 2016 and quickly became popular with our customers.

Gross written premiums from accident insurance, which was primarily travel-related, increased
by 70.8% from RMB182.5 million in the three months ended March 31, 2016 to RMB311.7 million
in the three months ended March 31, 2017, primarily because we further increased the number of
insurance agents and ecosystem partners and deepened cooperation with existing partners in the travel
ecosystem.

Gross written premiums from liability insurance, primarily including shipping insurance
purchased by logistics companies, insurance against damages of consumer electronics and employee
liability insurance, increased by 135.3% from RMB35.1 million in the three months ended March 31,
2016 to RMB82.6 million in the three months ended March 31, 2017, primarily due to an increase in
the number of logistics companies we cooperated with.

Gross written premiums from shipping return insurance increased by 25.1% from RMB206.1
million in the three months ended March 31, 2016 to RMB257.8 million in the three months ended
March 31, 2017, but, as a percentage of our total gross written premiums, decreased from 34.1% in
the three months ended March 31, 2016 to 25.0% in the three months ended March 31, 2017, as we
increased our focus on other product types with greater growth potentials.

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FINANCIAL INFORMATION

Gross written premiums from cargo insurance, which are generally purchased by merchants or
shoppers on e-commerce platforms, and gross written premiums from credit insurance and household
property insurance also experienced significant growth in the three months ended March 31, 2017 as
compared with the three months ended March 31, 2016, although they still accounted for a relatively
small percentage of our total gross written premiums.

Gross written premiums from bond insurance decreased by 22.6% from RMB108.8 million in the
three months ended March 31, 2016 to RMB84.2 million in the three months ended March 31, 2017,
as we increased our focus on other product types with greater growth potentials and better profitability
in response to increasing competition for bond insurance.

Premiums ceded to reinsurers

Premiums ceded to reinsurers increased significantly from RMB3.5 million in the three months
ended March 31, 2016 to RMB36.0 million in the three months ended March 31, 2017, primarily due
to the significant increase in gross written premiums from health insurance, as our reinsurance
arrangements are primarily in connection with our health insurance products.

Net change in unearned premium reserves

Net change in unearned premium reserves increased by 239.4% from RMB31.7 million in the
three months ended March 31, 2016 to RMB107.6 million in the three months ended March 31, 2017,
primarily due to the significant increase in gross written premiums in the three months ended March
31, 2017 compared with the same period in 2016. In addition, due to the growth of longer-term
products such as health insurance and credit insurance, the average term of policies sold in the three
months ended March 31, 2017 was longer than that in the three months ended March 31, 2016, which
also contributed to the increase in unearned premium reserves in the three months ended March 31,
2017 compared with the same period in 2016.

Net premiums earned

As a result of the foregoing, net premiums earned increased by 55.8% from RMB569.2 million
in the three months ended March 31, 2016 to RMB886.8 million in the three months ended March 31,
2017.

Net investment income

We had net investment loss of RMB167.1 million in the three months ended March 31, 2016 and
net investment income of RMB95.6 million in the three months ended March 31, 2017, primarily due
to a decrease in net realized loss from RMB231.6 million in the three months ended March 31, 2016
to RMB61.8 million in the three months ended March 31, 2017, and an increase in dividend income
from equity and investment funds from RMB5.5 million in the three months ended March 31, 2016 to
RMB95.7 million in the three months ended March 31, 2017. The decrease in net realized loss was
primarily determined by the general conditions of the PRC capital markets in the three months ended
March 31, 2016 and 2017. The Shanghai Stock Exchange Composite Index and the Shenzhen Stock
Exchange Composite Index decreased by 15.1% and 17.0%, respectively, in the three months ended

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FINANCIAL INFORMATION

March 31, 2016, but increased by 3.8% and 2.2%, respectively, in the three months ended March 31,
2017. The increase in dividend income from equity and investment funds was primarily due to an
increase in high-dividend securities in our investment portfolio as we adjusted our investment strategy
based on market conditions.

Net fair value loss through profit or loss

Net fair value loss through profit or loss increased from RMB52.4 million in the three months
ended March 31, 2016 to RMB96.6 million in the three months ended March 31, 2017. The changes
were primarily driven by the general conditions of the PRC capital markets in the three months ended
March 31, 2016 and 2017.

Other operating income

Other operating income increased by from RMB0.2 million in the three months ended March 31,
2016 to RMB10.1 million in the three months ended March 31, 2017, as we started to generate
advisory income in 2017. The advisory income of RMB9.0 million in the three months ended March
31, 2017 represented technology service charges we received from Ping An Insurance for selling its
auto insurance products.

Total income

As a result of the foregoing, total income increased by 156.0% from RMB349.9 million in the
three months ended March 31, 2016 to RMB895.9 million in the three months ended March 31, 2017.

Net claims incurred

Net claims incurred increased by 49.4% from RMB265.6 million in the three months ended
March 31, 2016 to RMB396.7 million in the three months ended March 31, 2017, primarily due to the
increase in our net premiums earned. As a percentage of net premiums earned, however, net claims
incurred decreased from 46.7% in the three months ended March 31, 2016 to 44.7% in the three
months ended March 31, 2017, primarily due to the continuous improvement in our risk management
measures through data collection and accumulated experience, as well as the growth of insurance
products with relatively low loss ratios, such as travel-related accident insurance products.

Handling charges and commissions

Handling charges and commissions increased by 159.0% from RMB44.6 million in the three
months ended March 31, 2016 to RMB115.5 million in the three months ended March 31, 2017,
primarily due to an increase in commissions paid to agents and sales channels in relation to our
fast-growing health insurance and accident insurance products.

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FINANCIAL INFORMATION

Finance costs

Finance costs increased from RMB157,000 in the three months ended March 31, 2016 to
RMB445,000 in the three months ended March 31, 2017, primarily because we held more securities
sold under agreements to repurchase in the three months ended March 31, 2017 than in the three
months ended March 31, 2016, resulting in an increase in interests incurred by such liabilities in the
three months ended March 31, 2017.

Other operating and administrative expenses

Other operating and administrative expenses increased by 81.9% from RMB333.2 million in the
three months ended March 31, 2016 to RMB606.0 million in the three months ended March 31, 2017,
primarily due to a 173.7% increase in employee benefit expense resulting from a significant increase
in headcount and a raise in average salaries. Consulting fees and service charges increased by 67.9%
from RMB201.4 million in the three months ended March 31, 2016 to RMB338.1 million in the three
months ended March 31, 2017, which was largely in line with the increase in our gross written
premiums. The increase in other operating and administrative expenses was also due to increases in
rental fees and various miscellaneous expenses, which were primarily attributable to the expansion of
our business and expenses in relation to the Global Offering.

Income tax expense

We had income tax credit of RMB38.3 million and RMB20.6 million in the three months ended
March 31, 2016 and 2017, respectively, as we had a net operating loss before income tax in each of
these periods.

Net loss for the period

As a result of the foregoing, net loss for the period decreased by 20.9% from RMB255.4 million
in the three months ended March 31, 2016 to RMB202.1 million in the three months ended March 31,
2017.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Gross written premiums

Gross written premiums increased by 49.3% from RMB2,283.0 million in 2015 to RMB3,408.0
million in 2016, primarily due to significant increases in gross written premiums from accident
insurance, health insurance and liability insurance, partially offset by a decrease in gross written
premiums from shipping return insurance.

Gross written premiums from accident insurance, which was primarily travel-related, increased
by 247.3% from RMB282.8 million in 2015 to RMB982.2 million in 2016, primarily because we
further increased the number of our partners and deepened cooperation with existing partners in the
travel ecosystem.

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FINANCIAL INFORMATION

Gross written premiums from health insurance increased from RMB13.4 million in 2015 to
RMB205.0 million in 2016, primarily due to gross written premiums generated by several new health
insurance products we launched in 2016, including Personal Clinic Policy, Diabetes Policy and
customized group insurance products.

Gross written premiums from liability insurance, primarily including shipping insurance
purchased by logistics companies and insurance against damages of consumer electronics, increased
from RMB81.2 million in 2015 to RMB185.1 million in 2016, primarily due to an increase in the
number of logistics companies we cooperated with.

Gross written premiums from cargo insurance, which are generally purchased by merchants or
shoppers on e-commerce platforms, and gross written premiums from credit insurance also
experienced significant growth in 2016 as compared with 2015, although they still accounted for a
relatively small percentage of our total gross written premiums.

Gross written premiums from shipping return insurance, our first major insurance product,
decreased by 8.1% from RMB1,298.2 million in 2015 to RMB1,193.6 million in 2016, as we increased
our focus on other product types with greater growth potentials. In addition, we faced increased
competition in 2016 as there were new market entrants providing shipping return insurance on the
platforms of our major e-commerce ecosystem partners, such as Taobao Marketplace.

Premiums ceded to reinsurers

Premiums ceded to reinsurers increased by 280.8% from RMB10.4 million in 2015 to RMB39.6
million in 2016, primarily due to the significant increase in gross written premiums from health
insurance and newly signed reinsurance agreements, as our reinsurance arrangements are primarily in
connection with our health insurance products.

Net change in unearned premium reserves

Net change in unearned premium reserves decreased by 59.3% from RMB351.1 million in 2015
to RMB143.0 million in 2016. We did not recognize a significant amount of unearned premium
reserves in 2014 as our business was still at an early stage. In addition, our business experienced
significant growth in 2015, which resulted in a substantial net increase in unearned premium reserves
in 2015.

Net premiums earned

As a result of the foregoing, net premiums earned increased by 67.9% from RMB1,921.5 million
in 2015 to RMB3,225.4 million in 2016.

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FINANCIAL INFORMATION

Net investment income

Net investment income decreased by 81.1% from RMB520.7 million in 2015 to RMB98.6 million
in 2016, primarily due to a net realized loss of RMB184.4 million in 2016, compared with a net
realized gain of RMB362.5 million in 2015. The difference was primarily determined by the general
conditions of the PRC capital markets in 2015 and 2016. The Shanghai Stock Exchange Composite
Index and the Shenzhen Stock Exchange Composite Index increased by 8.6% and 13.6%, respectively,
in 2015, but decreased by 12.3% and 19.6%, respectively, in 2016.

Net fair value gains through profit or loss

Net fair value gains through profit or loss were RMB41.8 million in 2016, compared with
RMB40.6 million in 2015. The variations were primarily determined by the general conditions of the
PRC capital markets in 2015 and 2016.

Other operating income

Other operating income increased by 75.9% from RMB26.6 million in 2015 to RMB46.8 million
in 2016, primarily due to an increase in government grants.

Total income

As a result of the foregoing, total income increased by 36.0% from RMB2,509.3 million in 2015
to RMB3,412.7 million in 2016.

Net claims incurred

Net claims incurred increased by 3.0% from RMB1,316.3 million in 2015 to RMB1,355.3 million
in 2016, primarily due to the increase in our net premiums earned. As a percentage of net premiums
earned, however, net claims incurred decreased from 68.5% in 2015 to 42.0% in 2016, primarily due
to the continuous improvement in our risk management measures and the growth of insurance products
with relatively low loss ratios, such as travel-related accident insurance products.

Handling charges and commissions

Handling charges and commissions increased by 185.4% from RMB100.6 million in 2015 to
RMB287.1 million in 2016, primarily due to commissions paid to new agents and sales channels in
relation to our accident insurance and liability insurance products.

Finance costs

Finance costs decreased by 93.5% from RMB3.1 million in 2015 to RMB0.2 million in 2016,
primarily because we disposed of a significant amount of securities sold under agreements to
repurchase during 2015, resulting in a decrease in interests incurred by such liabilities in 2016.

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FINANCIAL INFORMATION

Other operating and administrative expenses

Other operating and administrative expenses increased by 70.6% from RMB1,029.8 million in
2015 to RMB1,757.1 million in 2016, primarily due to a significant increase in consulting fees and
service charges, which increased from RMB590.6 million in 2015 to RMB1,092.9 million in 2016.
This increase was primarily due to a significant increase in technical service fees paid to our
ecosystem partners from RMB570.3 million in 2015 to RMB1,026.8 million in 2016. Consulting fees
and service charges grew at a higher rate than gross written premiums in 2016 primarily due to the
rapid growth of certain products with relatively higher rates of technical service fees, such as accident
insurance. The increase in other operating and administrative expenses was also due to increases in
employee benefit expenses, rental fees and various miscellaneous expenses, all of which were
primarily attributable to the expansion of our business in 2016.

Income tax expense

Income tax expense decreased by 76.5% from RMB15.3 million in 2015 to RMB3.6 million in
2016, primarily due to a decrease in operating profit before income tax from RMB59.6 million in 2015
to RMB13.0 million in 2016. Our effective income tax rate increased from 25.7% in 2015 to 27.7%
in 2016 primarily due to year-to-year variations in non-taxable income and non-deductible expenses.

Net profit for the year

As a result of the foregoing, net profit for the year decreased by 78.8% from RMB44.3 million
in 2015 to RMB9.4 million in 2016.

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Gross written premiums

Gross written premiums increased by 187.5% from RMB794.1 million in 2014 to RMB2,283.0
million in 2015, primarily due to increases in gross written premiums from shipping return insurance,
bond insurance and accident insurance. Such increases were primarily due to an increase in the number
of our ecosystem partners, as well as the successful launch of new products in 2015, such as flight
delay insurance, online payment security insurance, cargo insurance and health insurance.

Gross written premiums from shipping return insurance increased from RMB613.1 million in
2014 to RMB1,298.2 million in 2015, primarily due to significant growth in policies sold through
existing ecosystem partners’ platforms, such as Taobao Marketplace.

Gross written premiums from bond insurance increased from RMB108.9 million in 2014 to
RMB453.3 million in 2015, primarily due to new products launched in a variety of channels.

Gross written premiums from accident insurance, which was primarily travel-related, increased
from RMB44.4 million in 2014 to RMB282.8 million in 2015, primarily due to significant growth in
policies sold through existing ecosystem partners, such as Ctrip.

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FINANCIAL INFORMATION

Gross written premiums from our other major types of insurance all experienced significant
growth in 2015 as compared with 2014, although they still accounted for a relatively small percentage
of our total gross written premiums.

Premiums ceded to reinsurers

Premiums ceded to reinsurers increased by 42.5% from RMB7.3 million in 2014 to RMB10.4
million in 2015, primarily due to the significant increase in gross written premiums from health
insurance, as our reinsurance arrangements are primarily in connection with our health insurance
products.

Net change in unearned premium reserves

Net change in unearned premium reserves increased by 370.6% from RMB74.6 million in 2014
to RMB351.1 million in 2015, primarily due to the significant increase in gross written premiums in
2015. In addition, due to the growth of longer-term products such as health insurance, the average term
of policies sold in 2015 was longer than that in 2014, which also contributed to the increase in
unearned premium reserves in 2015.

Net premiums earned

As a result of the foregoing, net premiums earned increased by 169.8% from RMB712.2 million
in 2014 to RMB1,921.5 million in 2015.

Net investment income

Net investment income increased by 550.1% from RMB80.1 million in 2014 to RMB520.7
million in 2015, primarily due to a significant increase in net realized gains from RMB19.0 million
in 2014 to RMB362.5 million in 2015. The increase was primarily due to the increase in our
investment assets purchased with the proceeds from the issuance of new shares in June 2015, as well
as to variations in the general conditions of the PRC capital markets in 2014 and 2015, particularly
the equity market boom in 2015. The increase in our investment assets in 2015 also resulted in a
significant increase in interest income from bond and trust investments as well as bank deposits.

Net fair value gains through profit or loss

Net fair value gains through profit or loss increased by 310.1% from RMB9.9 million in 2014
to RMB40.6 million in 2015, primarily due to the increase in our investment assets resulting from the
issuance of new shares in June 2015, as well as to variations in the general conditions of the PRC
capital markets in 2014 and 2015.

Other operating income

Other operating income increased by 72.7% from RMB15.4 million in 2014 to RMB26.6 million
in 2015, primarily due to an increase in government grants.

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FINANCIAL INFORMATION

Total income

As a result of the foregoing, total income increased by 206.9% from RMB817.5 million in 2014
to RMB2,509.3 million in 2015.

Net claims incurred

Net claims incurred increased by 151.7% from RMB522.9 million in 2014 to RMB1,316.3
million in 2015, primarily due to the increase in our net premiums earned. As a percentage of net
premiums earned, net claims incurred decreased from 73.4% in 2014 to 68.5% in 2015, primarily due
to the growth of insurance products with relatively low loss ratios, such as accident insurance and
bond insurance products.

Handling charges and commissions

Handling charges and commissions increased by 521.0% from RMB16.2 million in 2014 to
RMB100.6 million in 2015, primarily due to the increase in the number of agents and sales channels
as we diversified our product portfolio in 2015.

Finance costs

Finance costs decreased by 45.6% from RMB5.7 million in 2014 to RMB3.1 million in 2015,
primarily due to a reduction in securities sold under agreements to repurchase, which incurred interest
costs.

Other operating and administrative expenses

Other operating and administrative expenses increased by 336.0% from RMB236.2 million in
2014 to RMB1,029.8 million in 2015, primarily due to a significant increase in consulting fees and
service charges, which increased from RMB94.5 million in 2014 to RMB590.6 million in 2015. This
increase was primarily due to a significant increase in technical service fees paid to our ecosystem
partners from RMB92.2 million in 2014 to RMB570.3 million in 2015, as well as increases in
employee benefit expenses and various miscellaneous expenses. The increase in technical service fees
was mainly due to the rapid growth of certain products with relatively higher rates of technical service
fees, such as accident insurance. Other operating and administrative expenses grew at a higher rate
than gross written premiums did in 2015 primarily because we were still at an early stage of business
expansion and incurred significant expenses to develop new products and sales channels.

Income tax expense

Income tax expense was RMB15.3 million in 2015, compared with an income tax credit of
RMB0.4 million in 2014. We had a tax credit in 2014 primarily due to the recognition of deductibles
that were unrecognized in 2013, as well as to a substantial amount of non-taxable income, primarily
dividends from investments in money market funds, in 2014.

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FINANCIAL INFORMATION

Net profit for the year

As a result of the foregoing, net profit for the year increased by 19.7% from RMB37.0 million
in 2014 to RMB44.3 million in 2015.

DISCUSSION OF SELECTED CONSOLIDATED FINANCIAL POSITION INFORMATION

Assets

As of December 31, 2014, 2015 and 2016 and March 31, 2017, our total assets were RMB1,369.5
million, RMB8,069.1 million, RMB9,332.2 million and RMB8,556.1 million, respectively. The
following table sets forth the principal components of our assets as of the dates indicated:

As of December 31, As of March 31,

2014 2015 2016 2017

(in thousands of RMB)

Financial assets
Restricted statutory deposits . 200,000 248,125 248,125 248,125
Investments classified as
loans and receivables . . . . 408,299 1,207,896 1,707,648 1,716,451
Available-for-sale financial
assets . . . . . . . . . . . . . . . . 368,130 3,556,804 3,670,260 3,163,042
Financial assets at fair value
through
profit or loss . . . . . . . . . . . 121,486 1,321,398 1,599,230 1,694,232
Securities purchased under
agreements to resell . . . . . 50,000 — 302,300 800
Cash and cash equivalents . . 141,696 1,374,897 1,153,244 1,054,646
Total financial assets . . . . . . . . 1,289,611 7,709,120 8,680,807 7,877,296
Assets other than financial
assets (1) . . . . . . . . . . . . . . . . 79,850 360,023 651,416 678,809
Total assets . . . . . . . . . . . . . . . 1,369,461 8,069,143 9,332,223 8,556,105

Note:
(1) Assets other than financial assets included receivables, fixed and intangible assets, and other miscellaneous assets.

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FINANCIAL INFORMATION

Financial assets

Financial assets primarily consist of debt investments, equity investments, cash and deposits,
trust investment and wealth management products. All debt and equity investments are carried at fair
value, and the values reported in our financial information reflect then current market values as of the
end of each reporting period.

Total financial assets increased significantly from RMB1,289.6 million as of December 31, 2014
to RMB7,709.1 million as of December 31, 2015, primarily due to proceeds from the issuance of new
shares of RMB5,775.0 million in June 2015. A substantial amount of such proceeds were used to
purchase securities and other financial assets. As a result, most types of our financial assets, including
our cash and deposits, increased significantly from December 31, 2014 to December 31, 2015.

Total financial assets increased by 12.6% from RMB7,709.1 million as of December 31, 2015 to
RMB8,680.8 million as of December 31, 2016, primarily due to the growth of our business, particular
sales of investment-linked insurance products, which we stopped selling in January 2017 in
accordance with a new CIRC regulation. Available-for-sale financial assets and financial assets at fair
value through profit or loss increased by 3.2% and 21.0%, respectively, from December 31, 2015 to
December 31, 2016. Investments classified as loans and receivables increased by 41.4% from
RMB1,207.9 million as of December 31, 2015 to RMB1,707.6 million as of December 31, 2016,
primarily due to an increase in trust investment of RMB355.4 million, which was primarily due to our
strategy of further diversifying our investment portfolio and increasing allocation to fix-income
investments in our portfolio in light of market conditions. Cash and cash equivalents decreased by
16.1% from RMB1,374.9 million as of December 31, 2015 to RMB1,153.2 million as of December 31,
2016, primarily due to purchases of financial investments other than cash and cash equivalents in
2016.

Total financial assets decreased by 9.3% from RMB8,680.8 million as of December 31, 2016 to
RMB7,877.3 million as of March 31, 2017 primarily due to disposals of certain debt investments and
fund investments in our investment portfolio during the three months ended March 31, 2017.

Assets other than financial assets

Assets other than financial assets primarily consist of receivables, fixed and intangible assets,
and other miscellaneous assets. Receivables include interest receivables, premiums receivables and
receivables in relation to our reinsurance contracts. Assets other than financial assets increased by
350.6% from RMB79.9 million as of December 31, 2014 to RMB360.0 million as of December 31,
2015, and further by 80.9% to RMB651.4 million as of December 31, 2016, primarily due to the
growth of our business and the resultant increases in various receivables and fixed assets, including
the capitalization of certain research and development investments. Assets other than financial assets
increased by 4.2% from RMB651.4 million as of December 31, 2016 to RMB678.8 million as of March
31, 2017 primarily due to an increase in intangible assets resulting from capitalization of development
costs and an increase in reinsurers’ share of insurance contract liabilities resulting from the increase
in our premiums ceded to reinsurers.

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FINANCIAL INFORMATION

Liabilities

As of December 31, 2014, 2015 and 2016 and March 31, 2017, our total liabilities were
RMB348.9 million, RMB1,170.8 million, RMB2,473.3 million and RMB1,909.9 million, respectively.
The following table sets forth the principal components of our liabilities as of the dates indicated:

As of December 31, As of March 31,

2014 2015 2016 2017

(in thousands of RMB)

Insurance contract liabilities


Unearned premium reserves . 87,459 441,579 601,256 722,989
Claim reserves . . . . . . . . . . . 35,546 174,652 196,049 245,673
Total insurance contract
liabilities . . . . . . . . . . . . . . . 123,005 616,231 797,305 968,662
Financial liabilities
Policyholders’ deposits . . . . . — 12 211 203
Investment contract
liabilities . . . . . . . . . . . . . . — 1,562 573,069 137,196
Securities sold under
agreements to repurchase. . 140,000 1,600 282,674 2,300
Total financial liabilities . . . . . 140,000 3,174 855,954 139,699
Liabilities other than
insurance contract
liabilities and financial
liabilities . . . . . . . . . . . . . . . 85,894 551,420 819,992 801,504
Total liabilities . . . . . . . . . . . . 348,899 1,170,825 2,473,251 1,909,865

Insurance contract liabilities include unearned premium reserves and claim reserves. Unearned
premium reserves are portions of gross written premiums relating to unexpired risk of insurance
coverage. Claim reserves are a reasonable estimate at the balance sheet date of insurance contract
provisions for the claims to be incurred. Both unearned premium reserves and claim reserves are
positively related to gross written premiums during the relevant period. Our insurance contract
liabilities increased by 401.0% from RMB123.0 million as of December 31, 2014 to RMB616.2
million as of December 31, 2015, further by 29.4% to RMB797.3 million as of December 31, 2016,
and further by 21.5% to RMB968.7 million as of March 31, 2017, primarily due to the growth of our
business and the resultant increase in our gross written premiums.

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FINANCIAL INFORMATION

Financial liabilities primarily include investment contract liabilities and securities sold under
agreements to repurchase. Investment contract liabilities primarily include liabilities in respect of our
investment-linked insurance products, the sales of which increased significantly in 2016. We stopped
selling these products in January 2017 in accordance with a new CIRC regulation. Investment contract
liabilities decreased from RMB573.1 million as of December 31, 2016 to RMB137.2 million as of
March 31, 2017 as our policyholders gradually redeemed previously outstanding investment-linked
insurance products while we stopped selling such insurance products in January 2017 in accordance
with a new CIRC regulation. Securities sold under agreements to repurchase fluctuated during the
Track Record Period primarily due to variations in investment strategies in light of market conditions.

Liabilities other than insurance contract liabilities and financial liabilities primarily consist of
payables, premiums received in advance and deferred tax liabilities. Payables are primarily in relation
to service charges, handling charges and commissions, taxes, and employee salaries and benefits.
Liabilities other than insurance contract liabilities and financial liabilities increased by 541.9% from
RMB85.9 million as of December 31, 2014 to RMB551.4 million as of December 31, 2015, and further
by 48.7% to RMB820.0 million as of December 31, 2016, primarily due to the growth of our business
and the resultant increases in various payables. Liabilities other than insurance contract liabilities and
financial liabilities were largely stable at RMB801.5 million as of March 31, 2017 as compared with
RMB820.0 million as of December 31, 2016.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded our cash requirements principally from cash generated from
operating activities and capital contribution from shareholders.

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FINANCIAL INFORMATION

Going forward, we believe that our liquidity requirements will be satisfied by using a
combination of cash generated from operating activities, other funds raised from the capital markets
from time to time and the net proceeds received from the Global Offering.

Cash Flows

The following table sets forth our cash flows for the periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,

2014 2015 2016 2016 2017

(in thousands of RMB)


(unaudited)

Net cash generated from/(used in)


operating activities . . . . . . . . . . . 119,619 300,547 853,387 43,292 (518,053)
Net cash (used in)/generated from
investing activities . . . . . . . . . . . (143,084) (4,662,365) (1,355,921) (657,885) 700,305
Net cash generated from/(used in)
financing activities . . . . . . . . . . . 134,298 5,595,019 280,872 63,543 (280,819)
Net effect of foreign exchange rate
changes on cash . . . . . . . . . . . . . — — 9 (1) (31)
Net increase/(decrease) in cash
and cash equivalents. . . . . . . . . . 110,833 1,233,201 (221,653) (551,051) (98,598)
Cash and cash equivalents at
beginning of the year/period. . . . 30,863 141,696 1,374,897 1,374,897 1,153,244
Cash and cash equivalents at the
end of the year/period . . . . . . . . 141,696 1,374,897 1,153,244 823,846 1,054,646

Our cash inflows from operating activities primarily consist of cash premiums received for
insurance products we issued. Our cash outflows used in operating activities primarily consist of cash
payments of insurance claims, consulting fees and service charges, employee salaries and benefits, and
handling charges and commissions. Net cash from operating activities increased by 151.3% from
RMB119.6 million in 2014 to RMB300.5 million in 2015, further by 184.0% to RMB853.4 million in
2016, primarily due to increases in our gross written premiums as we continued to expand our
business. We had net cash outflows used in operating activities of RMB518.1 million in the three
months ended March 31, 2017 compared with net cash inflows from operating activities of RMB43.3
million in the three months ended March 31, 2016, primarily due to cash used in the three months
ended March 31, 2017 for the redemption of previously outstanding investment-linked insurance
products, which we stopped selling in January 2017 in accordance with a new CIRC regulation.

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FINANCIAL INFORMATION

Net cash used in investing activities increased from RMB143.1 million in 2014 to RMB4,662.4
million in 2015, and then decreased to RMB1,355.9 million in 2016, primarily due to variations in net
purchases of investments. Net purchases of investments were higher in 2015 primarily due to the use
of proceeds from issuance of new shares in purchases of investments. We had net cash inflows from
investing activities of RMB700.3 million in the three months ended March 31, 2017 compared with
net cash outflows used in investing activities in the three months ended March 31, 2016, primarily due
to disposals of certain debt investments and fund investments in our investment portfolio in the three
months ended March 31, 2017.

Net cash inflows from financing activities increased from RMB134.3 million in 2014 to
RMB5,595.0 million in 2015, and then decreased in 2016 to RMB280.9 million, primarily due to
proceeds from the issuance of new shares of RMB5,775.0 million in 2015. We had net cash outflows
used in financing activities of RMB280.8 million in the three months ended March 31, 2017 compared
with net cash inflows from financing activities of RMB63.5 million in the three months ended March
31, 2016, primarily due to repurchases of securities sold under agreements to repurchase in the three
months ended March 31, 2017.

Solvency Margin Ratio

The solvency margin ratio is a measure of capital adequacy for PRC insurance companies and is
calculated by dividing the actual capital, which is the difference between an insurance company’s
admitted assets and admitted liabilities as determined by the CIRC, by a statutory minimum capital.
Insurance companies carrying out business in China are required to comply with requirements on the
solvency margin ratio imposed by the CIRC.

Prior to 2016, the statutory minimum capital was calculated by reference to premiums written or
claims paid, while the actual capital held was adjusted net assets. An insurance company was
non-compliant with the solvency requirement if its solvency margin ratio was less than 100%. If it was
between 100% and 150%, the CIRC could order the insurance companies in question to submit and
implement appropriate plans to prevent any further deterioration of the ratio.

Under the China Risk Oriented Solvency System (C-ROSS), a new-generation solvency system
developed by the CIRC that took effect in January 2016. Under C-ROSS, insurance companies in
China must comply with (i) quantitative capital requirements on both core capital and actual capital,
which is the sum of core capital and supplementary capital, (ii) qualitative risk management
requirements, including operation risk, strategic risk, reputational risk and liquidity risk, and (iii)
market disciplines. Core capital means assets that can be used to pay off losses during continuing
operation or during liquidation, whereas supplemental capital means assets that can be used to pay off
losses during liquidation. As of December 31, 2016 and March 31, 2017, all of our actual capital was
core capital. The CIRC can take a number of regulatory measures against any insurance company
non-compliant with the solvency requirements. These regulatory measures include restrictions on
business scope, dividend distributions or investment strategy, order to transfer business or place
reinsurance, or removal of senior executives of the insurance company. We have maintained our
solvency ratio in compliance with the minimum requirement by the CIRC before and after the
transition to C-ROSS.

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FINANCIAL INFORMATION

The following table sets forth our solvency margin ratios as of December 31, 2014 and 2015
under the older solvency system and as of December 31, 2016 and March 31, 2017 under the C-ROSS:

As of December 31, As of March 31,

2014 2015 2016 2017

(in thousands of RMB, except percentages)

Actual capital (1) . . . . . . . . . . . . 862,972 5,589,870 6,705,039 6,442,715


Core capital . . . . . . . . . . . . . . . N/A N/A 6,705,039 6,442,715
Statutory minimum capital . . . . 120,714 344,977 928,092 1,009,369
Core solvency margin ratio . . . N/A N/A 722.5% 638.3%
Comprehensive solvency
margin ratio (2) . . . . . . . . ... 714.9% 1,620.4% 722.5% 638.3%

Notes:

(1) Actual capital for the purpose of calculating the solvency margin ratio is prepared under PRC GAAP.
(2) Comprehensive solvency margin ratio was simply known as solvency margin ratio under the older solvency system.

Our comprehensive solvency margin ratio increased significantly from 714.9% as of December
31, 2014 to 1,620.4% as of December 31, 2015, mainly due to increased assets resulting from the
issuance of new shares in June 2015, which generated proceeds of RMB5,775.0 million. Our
comprehensive solvency margin ratio decreased from 1,620.4% as of December 31, 2015 to 722.5%
as of December 31, 2016, mainly due to an increase in our statutory minimum capital, which in turn
was partly due to the transition to C-ROSS, and partly due to the significant growth in our gross
written premiums from RMB2,283.0 million in 2015 to RMB3,408.0 million in 2016. Our
comprehensive solvency margin ratio further decreased from 722.5% as of December 31, 2016 to
638.3% as of March 31, 2017 primarily due to further growth in our insurance business.

Working Capital

Taking into account expected cash from operating activities and the estimated net proceeds from
the Global Offering, our Directors are of the opinion that we will have sufficient funds to meet our
working capital requirements and financial requirements for capital expenditure for at least the next
12 months from the date of this prospectus.

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FINANCIAL INFORMATION

Capital Expenditures

We regularly make capital expenditures to expand our operations, maintain our equipment and
increase our operating efficiency. During the Track Record Period, our capital expenditures were made
for the acquisitions of property, plant and equipment, mainly computer hardware, and intangible
assets, mainly computer software. We have historically funded our capital expenditures through
issuance of shares and retained earnings. The table below sets forth our capital expenditures for the
periods indicated:

For the Three Months


For the Year Ended December 31, Ended March 31,

2014 2015 2016 2016 2017

(in thousands of RMB)


(unaudited)

Purchase of property and equipment,


intangible assets and other assets . . . . 22,094 39,673 183,641 25,506 37,567

Contractual Obligations

We lease certain of our offices under operating lease arrangements. Leases for properties have
initial periods of three to five years, at the end of which all terms are renegotiated. The table below
sets forth our future minimum lease payments under non-cancellable operating leases as of the dates
indicated:

As of December 31, As of March 31,

2014 2015 2016 2017

(in thousands of RMB)

Within 1 year (including 1 year) . . . .... 13,698 33,521 75,695 81,701


Between 1 and 2 years (including 2
years) . . . . . . . . . . . . . . . . . . . . . . .... 4,983 27,574 63,516 61,700
Between 2 and 3 years (including 3
years) . . . . . . . . . . . . . . . . . . . . . . .... — 22,839 47,589 46,678
Over 3 years . . . . . . . . . . . . . . . . . . .... — 104,746 171,140 164,332
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,681 188,680 357,940 354,411

INDEBTEDNESS

We did not have any material mortgages, charges, debentures, loan capital, debt securities, loans,
bank overdrafts or other similar indebtedness, finance lease or hire purchase commitments, liabilities
under acceptances (other than normal trade bills), acceptance credits, which are either guaranteed,
unguaranteed, secured or unsecured, or guarantees or other contingent liabilities as of July 31, 2017.
We did not have any banking facilities as of July 31, 2017.

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FINANCIAL INFORMATION

SELECTED FINANCIAL RATIOS

The following table sets forth our key financial ratios for the periods indicated:

For the Year Ended or For the Three Months


as of December 31, Ended or as of March 31,

2014 2015 2016 2016 2017

(unaudited)
(1)
Retention ratio . . . . . . . . . . . . . . . . . . 99.1% 99.5% 98.8% 99.4% 96.5%
Loss ratio (2) . . . . . . . . . . . . . . . . . . . . . . 73.4% 68.5% 42.0% 46.7% 44.7%
Expense ratio (3) . . . . . . . . . . . . . . . . . . . 35.2% 58.1% 62.7% 65.6% 78.4%
Combined ratio (4) . . . . . . . . . . . . . . . . . . 108.6% 126.6% 104.7% 112.3% 123.1%
Net investment yield (5) . . . . . . . . . . . . . . 4.8% 3.5% 3.6% 0.9% 2.0%
Total investment yield (6) . . . . . . . . . . . . 7.3% 12.6% 1.8% (2.9%) (0.0%)
Return on assets (7) . . . . . . . . . . . . . . . . . 2.7% 0.9% 0.1% (3.2%) (2.3%)
Return on equity (8) . . . . . . . . . . . . . . . . . 3.7% 1.1% 0.1% (3.8%) (3.0%)
Gearing ratio (9) . . . . . . . . . . . . . . . . . . . 25.5% 14.5% 26.5% 16.5% 22.3%

Notes:

(1) Retention ratio equals net written premiums, which is gross written premiums less premiums ceded to reinsurer, as a
percentage of gross written premiums.

(2) Loss ratio equals net claims incurred as a percentage of net premiums earned.
(3) Expense ratio equals insurance operating expenses expressed as a percentage of net premiums earned in the relevant
period.

(4) Combined ratio equals the sum of loss ratio and expense ratio.
(5) Net investment yield equals the sum of net interest income and dividend income less interest expense relating to
securities sold under agreements to repurchase for the period as a percentage of the average of the opening and closing
balances of total investment assets of the period (in the case of 2015 and 2016 and the three months ended March 31,
2016 and 2017) or the closing balance of total investment assets of the period (in the case of 2014).
(6) Total investment yield equals total investment income (defined as the sum of net investment income and net fair value
gains through profit or loss, less interest expense relating to securities sold under agreements to repurchase) for the
period as a percentage of the average of the opening and closing balances of total investment assets of the period (in the
case of 2015 and 2016 and the three months ended March 31, 2016 and 2017) or the closing balance of total investment
assets of the period (in the case of 2014).

(7) Return on assets equals profit for the period divided by the average of the opening and closing balances of total assets
of the period (in the case of 2015 and 2016 and the three months ended March 31, 2016 and 2017) or divided by the
closing balance of total assets of the period (in the case of 2014).

(8) Return on equity equals profit for the period divided by the average of the opening and closing balances of total equity
of the period.

(9) Gearing ratio is represented by total liabilities (excluding capital supplementary bonds and subordinated term debts)
divided by total assets.

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FINANCIAL INFORMATION

Retention Ratio

Our retention ratio was high during the Track Record Period as most of our products had
relatively short policy terms, small coverage amounts and high purchase frequency, which we
generally do not reinsure. During the Track Record Period, our reinsurance arrangements were
primarily in connection with our health insurance products. Our retention ratio decreased from 99.1%
in 2014 and 99.5% in 2015 to 98.8% in 2016 and further to 96.5% in the three months ended March
31, 2017 primarily due to the significant increase in gross written premiums from health insurance.

Loss Ratio, Expense Ratio and Combined Ratio

Our loss ratio decreased from 73.4% in 2014 to 68.5% in 2015, and further to 42.0% in 2016,
and from 46.7% in the three months ended March 31, 2016 to 44.7% in the three months ended March
31, 2017, primarily due to improved pricing and risk management capabilities, as well as a change in
our product mix. For example, our accident insurance and health insurance, on average, both have
significantly lower loss ratios than our shipping return insurance. The fast growth of these two product
types reduced our overall loss ratio during the Track Record Period.

Our expense ratio increased from 35.2% in 2014 to 58.1% in 2015 and further to 62.7% in 2016,
and from 65.6% in the three months ended March 31, 2016 to 78.4% in the three months ended March
31, 2017, primarily as a result of our increased focus on accident insurance products, which tend to
involve higher rates of handling charges and commissions and technical service fees than our other
types of insurance products, and as a result of increased employee benefits expenses, depreciation and
amortization and promotional expenses as we continued to expand our operations.

As a result of the foregoing, our combined ratio was 108.6%, 126.6%, 104.7%, 112.3% and
123.1% in 2014, 2015 and 2016 and the three months ended March 31, 2016 and 2017, respectively,
indicating an underwriting loss in each of these periods.

Net Investment Yield and Total Investment Yield

Our net investment yield and total investment yield are primarily determined by the general
conditions of the PRC securities market. For example, in 2016, the Shanghai Stock Exchange
Composite Index and the Shenzhen Stock Exchange Component Index dropped by 12.3% and 19.6%,
respectively. As a result, our total investment yield decreased from 12.6% in 2015 to 1.8% in 2016.
Our net investment yield is also affected by market interest rate and the proportion of high-dividend
securities in our investment portfolio.

Return on Assets and Return on Equity

The decreases in return on assets and return on equity from 2014 to 2015 were primarily due to
a significant increase in our total assets and total equity resulting from the issuance of new shares in
June 2015. The decreases in return on assets and return on equity from 2015 to 2016 were primarily
due to a decrease in our net profit resulting from the significant decrease in net investment income.
We had negative return on assets and return on equity in the three months ended March 31, 2017 as
we were loss-making during these periods, primarily due to (i) the significant increase in unearned
premium reserves due to the change in product mix which includes more products with longer terms,

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FINANCIAL INFORMATION

such as our health and consumer finance insurance products, (ii) the significant increase in operating
and administrative expenses due to the increased headcount and investment in research and
development in order to support the rapid growth of the Company and (iii) the significant increase in
handling charge and commissions and consulting fees and service charges due to significant growth
of our gross written premiums generated from the sales on the platforms of our ecosystem partners.
In 2016 and the three months ended March 31, 2017, the total handling charges and commissions and
technical service fees that we paid to our top five ecosystem partner groups (in terms of GWP
contribution) amounted to RMB966.0 million and RMB251.1 million, respectively.

Gearing Ratio

The decrease in gearing ratio from December 31, 2014 to December 31, 2015 was primarily due
to a significant increase in our total assets resulting from the issuance of new shares in June 2015. The
increases in gearing ratio from December 31, 2015 to December 31, 2016 and from March 31, 2016
to March 31, 2017 were primarily due to the increases in our total liabilities, which in turn were due
to the growth of our business and the resultant increases in insurance contract liabilities and various
payables. The increase in our total liabilities from December 31, 2015 to December 31, 2016 was also
due to a significant increase in investment contract liabilities primarily in respect of our
investment-linked insurance products, which we stopped selling in January 2017 in accordance with
a new CIRC regulation.

CONTINGENT LIABILITIES

As of December 31, 2014, 2015 and 2016, March 31, 2017 and as of July 31, 2017, we did not
have any material contingent liabilities.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

As of the Latest Practicable Date, we have not entered into any off-balance sheet arrangements.

MATERIAL RELATED PARTY TRANSACTIONS

During the Track Record Period, we had substantial related party transactions with our
shareholders and their affiliates, particularly Ant Financial Group. In 2014, 2015 and 2016 and the
three months ended March 31, 2016 and 2017, sale of insurance contracts to Ant Financial Group
amounted to RMB28.0 million, RMB80.3 million, RMB85.2 million, RMB44.4 million and RMB3.8
million respectively, technical service fees paid to Ant Financial Group amounted to RMB22.8
million, RMB304.7 million, RMB437.7 million, RMB78.7 million and RMB94.3 million, respectively,
and claims of insurance contracts to Ant Financial Group amounted to RMB15.2 million, RMB44.6
million, RMB59.2 million, RMB20.3 million and RMB56 thousand, respectively. In addition, we paid
substantial amounts of technical service fees and commission fees to Ctrip mainly in connection with
our travel-related insurance business during the Track Record Period. In 2014, 2015 and 2016 and the
three months ended March 31, 2016 and 2017, technical service fees paid to Ctrip amounted to
RMB25.2 million, RMB170.0 million, RMB349.3 million, RMB93.8 million and RMB109.8 million,
respectively, and commission fees paid to Ctrip amounted to RMB17.7 million, RMB90.7 million,
RMB136.9 million, RMB37.9 million and RMB32.6 million, respectively.

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FINANCIAL INFORMATION

For more details about our related party transactions, see Note 40 to the Accountant’s Report
included in Appendix I to this prospectus.

Our Directors confirm that, during the Track Record Period, our transactions with related parties
were conducted on an arm’s length basis, and they have no impact on our results of operations or make
our historical results not reflective of our future performance.

FINANCIAL RISK DISCLOSURE

We are exposed to a variety of insurance and financial risks, including insurance risk, foreign
exchange risk, interest rate risk, price risk, credit risk and liquidity risk.

Insurance Risk

Insurance risk refers to the risk of possible occurrences of insured events and the uncertainty of
payment per claim incurred due to an insured event and the payment time. Insurance risk arises from,
among others, (i) occurrence risk due to the mismatch of the numbers of insured events and our
expected insured events; (ii) severity risk due to the difference between the costs incurred from
insured events and our expected costs; and (iii) development risk due to the possible variance of
amount borne by policyholders under insurance contracts upon the expiration of contracts.

The major risk facing our Company is the possibility that the actual payment per claim insured
and the frequency or severity of claims arising from insurance contracts exceeds the amount or level
anticipated at the time of underwriting. We have developed our insurance underwriting strategy to
diversify the type of insurance risks through a large portfolio of insurance contracts, establish and
adopt underwriting strategy and policy carefully and make reasonable and appropriate reinsurance
arrangements to reduce the variability of the expected risks.

We also face insurance concentration risk arising from a lack of diversification, either
geographical or by product type, of our portfolio. We have a broad geographical footprint across
China, and insurance risks may vary across different locations. Our product type diversification
increased significantly during the Track Record Period. For example, the percentage of our total gross
written premiums accounted for by our top product type, shipping return insurance, decreased from
77.2% in 2014 to 35.0% in 2016 and further to 25.0% in the three months ended March 31, 2017.
However, if there is any unanticipated or inappropriate concentration of insurance, it may impact the
severity of claims arising from insured events based on the portfolio of insurance contracts.

For detailed major assumptions of our insurance risks and sensitivity analysis, please see Note
4(a) to the Accountant’s Report set forth in Appendix I to this prospectus.

Foreign Exchange Risk

We currently operate solely in China with substantially all of the transactions settled in Renminbi
and substantially all of our financial assets and liabilities denominated in Renminbi. Therefore, our
Directors believe that our business is not exposed to material foreign exchange risk.

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FINANCIAL INFORMATION

Interest Rate Risk

Floating rate instruments make us exposed to cash flows interest rate risk and fixed rate
instruments make us exposed to fair value interest rate risk. We manage our interest rate risk primarily
by maintaining an appropriate portfolio of fixed and floating rate instruments. During the Track
Record Period, we predominantly sold short-term insurance policies. Therefore, we were not exposed
to significant interest rate risk typically associate with long-term insurance liabilities. However,
fluctuations in interest rates may affect the market value of debt securities held in our investment
portfolio. For sensitivity analysis on changes in interest rate, please see Note 4(b)(ii) to the
Accountant’s Report set forth in Appendix I to this prospectus.

Price Risk

Equity price risk is the risk that the fair value of a financial instrument will fluctuate because
of changes in market prices (other than those arising from interest rate risk or currency risk), whether
those changes are caused by factors specific to the individual financial instrument or its issuer, or
factors affecting all similar financial instruments traded in the market.

For sensitivity analysis on changes in prices of financial instruments, please see Note 4(b)(iii)
to the Accountant’s Report set forth in Appendix I to this prospectus.

Credit Risk

Credit risk is the risk of economic loss resulting from the failure of one of our obligors to make
any payment of principal or interest when due, the loss in value resulting from a corporate failure. We
are exposed to credit risks primarily associated with our fixed income investments, our credit
guarantee insurance and our reinsurance arrangements with reinsurers.

We mitigate credit risk by utilizing detailed credit control policies, by undertaking credit
analysis on potential investments, and by imposing aggregate counter party exposure limits within our
investment portfolio. Our investment guidelines also require that the risk levels of the various
investment sectors be continuously monitored with allocations adjusted accordingly.

We manage the credit risk associated with our credit guarantee insurance products and solutions
by adopting comprehensive credit assessment of borrowers under the assets covered by our credit
guarantee insurance based on data available to us and our big data analytics, a combination of cash
flow calculations and stress tests with our ecosystem partners, and effective delinquency management
and bad-debt collection measures. In addition, we also monitor credit risk during the term of the credit
facilities.

To reduce the credit risk associated with our reinsurance agreements, specific counterparty
exposure measures and limits are imposed. In addition, we monitor the financial condition of our
reinsurers on an ongoing basis and review our reinsurance agreements periodically. In addition, we

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FINANCIAL INFORMATION

regularly review overdue balances and makes provision for doubtful debts covering both general and
specific provisions based on the aging of the premiums receivables. We assess our investment and
reinsurers with reference to internal and external credit ratings and periodically re-assess such ratings
to ensure accurate control procedures.

Other key areas where we are exposed to credit risk include our deposits in commercial banks,
premiums receivables, financial assets measured at fair value with its variance recorded in current
profits and losses and investment in available-for-sale financial assets.

As we keep our deposits mostly in commercial banks and financial institutions that are well
recognized in terms of their stability, our Directors believe that we are not exposed to significant
credit risk and will not be subject to significant financial losses resulting from any default by any such
counterparty.

Due to the nature of our products, we did not have substantial premiums receivables during the
Track Record Period. As of March 31, 2017, we had premiums receivables of RMB173.9 million, of
which RMB126.7 million had been received as of August 31, 2017.

Our investment portfolio is subject to the regulation by the CIRC. We currently engage some
qualified insurance asset management companies to manage our investment portfolio. These asset
management companies are selected through a stringent assessment process. They must demonstrate
their investment capabilities, asset exposure, historical performance and good creditworthiness. We
also update our investment guidelines every year and monitor our credit risk internally on a daily
basis. Our Directors believe that the credit risk to which we are exposed is well managed.

Liquidity Risk

Liquidity risk primarily refers to the possibility that we have insufficient cash available to meet
our payment obligations to counterparties as they become due as well as the expenses incurred in
relation to our daily operations.

We seek to manage liquidity risk by emphasizing flexible insurance product design and by
matching, to the extent possible and appropriate, the duration of our investment assets with the
duration of our insurance products. Most of our assets are in the form of marketable securities.

For a detailed liquidity risk analysis, please see Note 4(b) to the Accountant’s Report set forth
in Appendix I to this prospectus.

FUTURE DIVIDENDS

PRC laws require that dividends be paid only out of the profit for the year calculated according
to PRC accounting principles, which differ in many aspects from the generally accepted accounting
principles in other jurisdictions, including HKFRS. Distributions from us and our subsidiaries may
also become subject to any restrictive covenants in bank credit facilities, convertible bond instruments
or other agreements that we or our subsidiaries may enter into in the future.

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FINANCIAL INFORMATION

The amount of dividend actually distributed to our shareholders will depend upon our earnings
and financial condition, operating requirements, capital requirements and any other conditions that our
Directors may deem relevant and will be subject to approval of our shareholders. Our Board has the
absolute discretion to recommend any dividend.

We have not previously declared or paid cash dividends and we cannot declare or pay any
dividends in the near future on our H Shares as long as we continue to be loss-making.

LISTING EXPENSE

Based on the mid-point Offer Price of HK$56.70, the total estimated listing related expenses
payable by us in relation to the Global Offering is approximately RMB294.6 million (or approximately
RMB58.2 million after excluding underwriting fees and commissions and incentive fees of
approximately RMB236.4 million). We estimate that listing expenses of RMB11.9 million will be
charged to our consolidated statements of comprehensive income for the year ending December 31,
2017, and RMB282.7 million is expected to be capitalized and accounted for as a deduction from
equity. These listing expenses mainly comprise professional fees paid and payable to the Joint
Sponsors, Joint Bookrunners, the Underwriters, legal advisors and the reporting accountant for their
services rendered in relation to the Listing and the Global Offering. Our Directors do not expect such
expenses to have a material adverse impact on our financial results for the year ending December 31,
2017.

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of our Group
prepared in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the Global
Offering on the net tangible assets of our Group as of March 31, 2017 as if the Global Offering had
taken place on that date. The unaudited pro forma statement of adjusted net tangible assets of our
Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may
not provide a true picture of our net tangible assets had the Global Offering been completed as of
March 31, 2017 or at any future date. It is prepared based on our consolidated net assets as of March
31, 2017 as set forth in the Accountant’s Report in Appendix I to this prospectus, and adjusted as
described below. No adjustment has been made to reflect any trading result or other transactions of
our Group entered into subsequent to March 31, 2017. Our unaudited pro forma adjusted net tangible
assets does not form part of the Accountant’s Report in Appendix I to this prospectus.

Audited
Consolidated
Net Tangible Estimated Net Unaudited
Assets of the Proceeds from Pro Forma Unaudited Pro Forma Adjusted
Group as at 31 the Global Adjusted Net Net Tangible Assets per
March 2017 Offering Tangible Assets Ordinary Share

Note 1 Note 2 Note 3 Note 3

RMB’000 RMB’000 RMB’000 RMB HK$

Based on an Offer Price of


HK$53.70 per share . . . . 6,471,358 8,681,816 15,153,174 10.52 12.57
Based on an Offer Price of
HK$59.70 per share . . . . 6,471,358 9,657,328 16,128,686 11.20 13.38

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FINANCIAL INFORMATION

Notes:
1. The audited consolidated net tangible assets attributable to equity holders of the Group as at 31 March 2017 is based on
the audited consolidated net assets of the Group attributable to the equity holders of the Group as at 31 March 2017 of
approximately RMB6,646,240 thousand, as shown in the Accountant’s Report, the text of which is set out in Appendix
I to this prospectus, with an adjustment for the intangible assets and goodwill of the Group as at 31 March 2017 of
approximately RMB174,882 thousand.
2. The estimated net proceeds from the Global Offering are based on the indicative Offer Prices of HK$53.70 and HK$59.70
per share, being the lower end to higher end of the stated offer price range, after deduction of the underwriting fees and
listing related expenses payable by the Group (excluding listing expense of RMB7,603,592 which have been charged to
our consolidated statement of comprehensive income up to 31 March 2017) and takes no account of any shares which
may be allotted and issued upon the exercise of the Over-allotment Option or any shares which may be allotted, issued
or repurchased by the Group pursuant to the general mandate.

3. The unaudited pro forma adjusted net tangible assets per share is arrived at after adjustments referred to in the preceding
paragraphs and on the basis of 1,439,918,900 shares are in issue assuming that the Global Offering has been completed
on 31 March 2017, but takes no account of any shares which may be allotted and issued upon the exercise of the
Over-allotment Option or any shares which may be allotted, issued or repurchased by the Group pursuant to the general
mandate.
4. For the purpose of this unaudited pro forma adjusted net tangible assets, the balance stated in Renminbi are converted
into Hong Kong dollars at a rate of RMB0.83687 to HKD1.00000 set by the PBOC prevailing on 13 September 2017.
No representation is made that Renminbi amounts have been, could have been or may be converted to Hong Kong dollars,
or vice versa, at that rate.
5. No adjustment has been made to the unaudited pro forma adjusted net tangible assets to reflect any trading results or
other transactions of the Group entered into subsequent to 31 March 2017.

RECENT DEVELOPMENTS

Our Directors confirm that, up to the date of this prospectus, other than as disclosed in “Summary
— Overview — Net Loss in 2017” and “Summary — Recent Developments”, there is no event since
March 31, 2017 that would materially affect the information as set out in the Accountant’s Report
included in Appendix I to this prospectus.

DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES

Our Directors confirm that, except as otherwise disclosed in this prospectus, as at the Latest
Practicable Date, there was no circumstance that would give rise to a disclosure requirement under
Rules 13.13 to 13.19 of the Listing Rules.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

DIRECTORS

Upon Listing, our Board will consist of 13 Directors, including 2 executive Directors, 6
non-executive Directors and 5 independent non-executive Directors. The following table sets out the
information regarding our Directors:

Date of joining the Date of


Name Age Position Responsibilities Company Appointment

Yaping Ou (歐亞平) 55 Chairman of the Provide overall September 29, 2013 November 14, 2013
(Note 1) . . . . . . . . . Board and strategic planning and
executive Director business direction;
member of the
Remuneration and
Nomination
Committee

Jin Chen (陳勁) . . . . . 48 Executive Director Provide overall June 1, 2014 November 14, 2014
and chief executive management and
officer overseeing day to day
operations of the
Company; chairman of
the Investment
Strategy Committee

Xinyi Han (韓歆毅) . . . 39 Non-executive Provide professional November 23, 2016 November 23, 2016
Director opinion and judgment
to our Board; member
of the Investment
Strategy Committee

Jimmy Chi Ming Lai 44 Non-executive Provide professional November 29, 2013 November 29, 2013
(賴智明) . . . . . . . . Director opinion and judgment
to our Board; member
of the Investment
Strategy Committee

Guoping Wang 53 Non-executive Provide professional December 9, 2016 December 9, 2016


(王國平) . . . . . . . . Director opinion and judgment
to our Board, member
of the Audit
Committee

Xiaoming Hu (胡曉明) 46 Non-Executive Provide professional November 29, 2013 November 29, 2013
Director opinion and judgment
to our Board; member
of the Risk
Management
Committee

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Date of joining the Date of


Name Age Position Responsibilities Company Appointment

Fang Zheng (鄭方) . . . 52 Non-executive Provide professional November 29, 2013 March 9, 2017
Director opinion and judgment
to our Board;
chairman of the Risk
Management
Committee

Hugo Jin Yi Ou 25 Non-executive Provide professional July 3, 2017 July 3, 2017


(歐晉羿) (Note 1) . . . . Director opinion and judgment
to our Board; member
of the Investment
Strategy Committee

Shuang Zhang (張爽) . . 45 Independent Supervise and provide November 14, 2016 November 14, 2016
non-executive independent judgment
Director to our Board;
chairman of the
Remuneration and
Nomination
Committee

Hui Chen (陳慧) . . . . . 50 Independent Supervise and provide December 21, 2016 December 21, 2016
non-executive independent judgment
Director to our Board;
chairman of the Audit
Committee

Li Du (杜力) . . . . . . . 36 Independent Supervise and provide December 21, 2016 December 21, 2016
non-executive independent judgment
Director to our Board; member
of the Remuneration
and Nomination
Committee

Yifan Li . . . . . . . . . . 49 Independent Supervise and provide December 21, 2016 December 21, 2016
non-executive independent judgment
Director to our Board; member
of the Audit
Committee

Ying Wu (吳鷹) . . . . . 58 Independent Supervise and provide July 4, 2017 July 4, 2017
non-executive independent judgment
Director to our Board; member
of the Risk
Management
Committee

Note:
(1) Hugo Jin Yi Ou is the son of Yaping Ou.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

EXECUTIVE DIRECTORS

Mr. Yaping Ou (歐亞平), aged 55, has been the Chairman of the Board since November 2013.
Mr. Ou is responsible for overall strategic planning and business direction, and is also an executive
Director and a member of the Remuneration and Nomination Committee. Mr. Ou obtained a bachelor’s
degree in engineering management from the Beijing Institute of Technology (北京理工大學) in July
1984. Mr. Ou has around 30 years of experience in investing and corporate management. He served
as the chairman and executive director of Sinolink Worldwide Holdings Limited (百仕達控股有限公
司),a company whose shares are listed on Main Board of the Stock Exchange (SEHK: 1168), between
December 1997 and August 2013, and has served as its non-executive director since August 2013. Mr.
Ou has been the chairman of Cnhooray Internet Technology Co. Ltd (深圳日訊網絡科技股份有限公
司) since 2000. Mr. Ou has served as the chairman of the board of Rockbund Art Museum since
September 2009. Mr. Ou has been a trustee for The Nature Conservancy China Board since September
2009 and a member of the board of The Paradise Foundation since April 2015, both charitable
environmental organizations.

Mr. Jin Chen (陳勁), aged 48, is an executive Director and chief executive officer of our
Company and the chairman of our Investment Strategy Committee. Mr. Chen is responsible for the
overall management of the Company and oversees day-to-day operations at the Company. Mr. Chen
obtained a bachelor’s degree in engineering and a master’s degree in engineering management from
Huazhong University of Technology (華中理工大學) in July 1991 and June 1994, respectively. In
addition, Mr. Chen also obtained an executive master of business administration degree from the
Cheung Kong Graduate School of Business (長江商學院) in 2012. He is currently serving as a visiting
professor of the Chinese University of Hong Kong. Mr. Chen has nearly 20 years’ experience in
finance and business management. He was president of the credit card centre of CITIC Bank Co., Ltd.
(中信銀行股份有限公司) from August 2006 to May 2014 and a vice president from July 2005 to
August 2006. Prior to that, he worked as a vice president in China Merchants Fund Management Co.,
Ltd. (招商基金管理有限公司) from 2003 to 2005 and as a vice president at China Merchants Securities
Co., Ltd (招商証券股份有限公司) from 2002 to 2003. Mr. Chen was also the vice head of the
director’s office at China Merchants Bank Co., Ltd. from March 1999 to July 2001.

NON-EXECUTIVE DIRECTORS

Mr. Xinyi Han (韓歆毅), aged 39, is a non-executive Director and a member of our Investment
Strategy Committee. Mr. Han obtained a bachelor’s degree in economics and a master’s degree in
economics from Tsinghua University (清華大學) in July 1999 and June 2001, respectively. Mr. Han
has over 15 years of experience in finance. Mr. Han has been vice president of Ant Financial
(浙江螞蟻小微金融服務集團股份有限公司), a substantial shareholder of the Company, since July
2014. Prior to that, Mr. Han was a vice president at Alipay (Hong Kong) Holding Limited (支付寶(香
港)控股有限公司) from September 2011, and had also worked at China International Capital
Corporation Limited (中國國際金融有限公司) from July 2001 to September 2011. He has served as a
director of Hundsun Technologies Inc., a company listed on the Shanghai Stock Exchange (SSE:
600570) since February 2016.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Jimmy Chi Ming Lai (賴智明), aged 44, is a non-executive Director and a member of our
Investment Strategy Committee. Mr. Lai obtained a master’s degree in business administration from
Harvard University in June 2006. He has been the head of the financial technology group of Tencent
since 2015. Mr. Lai was formerly the general manager of Tencent from 2011 to 2015, and general
manager of the QQ membership division from 2009 to 2011. In addition, he has been a non-executive
director of Shanghai Haomai Asset Management Co., Ltd (上海好買財富管理有限公司) (SSE:
834418) since February 2017 and was a director of Shanghai Yimeng Software Technology Co., Ltd
(上海益盟軟件技術有限公司) (SSE: 832950) from December 2015 to February 2017.

Mr. Guoping Wang (王國平), aged 53, is a non-executive Director and a member of the Audit
Committee. Mr. Wang obtained a bachelor’s and master’s degree in engineering from Tsinghua
University (清華大學) in July 1988 and June 1994, respectively. Mr. Wang has been a vice general
manager of Ping An P&C (中國平安財產保險股份有限公司) since June 2016.

Mr. Xiaoming Hu (胡曉明), aged 46, is a non-executive Director and a member of the Risk
Management Committee. Mr. Hu graduated from Zhejiang University (浙江大學), majoring in finance
by correspondence, in June 2002 and a master of business administration from China Europe
International Business School (中歐國際工商學院) in September 2010. Mr. Hu has been the president
of Alibaba Cloud Computing Ltd. since November 2014. Mr. Hu has been vice president of Zhejiang
Alibaba Microfinance Co., Ltd. ( 浙江阿里巴巴小額貸款股份有限公司) from 2010 to 2011, and a
senior supervisor and president’s assistant of Alipay (China) Network Technology Co., Ltd. (支付寶
(中國)網絡技術有限公司) from 2005 to 2008. He serves as a non-executive director of Sinosoft
Technology Group Limited, a company listed on the Stock Exchange (HKSE: 1297). He served as an
independent director of Zhejiang Daily Media Group Co., Ltd., a company listed on the Shanghai
Stock Exchange (SSE: 600633) from April 2016 to March 2017 and served as a director of Hundsun
Technologies Inc., a company listed on the Shanghai Stock Exchange (SSE: 600570) from October
2014 to February 2016.

Mr. Fang Zheng (鄭方), aged 52, is a non-executive Director and chairman of the Risk
Management Committee. Mr. Zheng obtained a bachelor’s degree in engineering from the Shaanxi
Institute of Mechanical Engineering (陝西機械學院) in July 1984, a master’s degree in economics
from Foreign Economic and Trade University (對外經濟貿易大學) in June 1990 and a master of
business administration degree from Harvard University in June 1996. Mr. Zheng has over 11 years
of experience in finance. Mr. Zheng has been managing director and chief investment officer of
Keywise Capital Management (HK) Limited since 2006.

Mr. Hugo Jin Yi Ou (歐晉羿), aged 25, is the son of Mr. Yaping Ou and has been appointed as
a non-executive Director of our Company. He is also a member of our Investment Strategy Committee.
Mr. Hugo Ou obtained a bachelor’s degree in East Asian studies from Princeton University in July
2015. He has been a non-executive director of Sinolink Worldwide Holdings Limited
(百仕達控股有限公司), a company whose shares are listed on the Stock Exchange (SEHK: 1168),
since January 2016. Prior to that, Mr. Hugo Ou worked as an associate at Thrive Capital from August
2015 to August 2016 and also served as manager of the planning and development department of
Sinolink Worldwide from 2010 to 2015.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Shuang Zhang (張爽), aged 45, is an independent non-executive director and chairman of
the Remuneration and Nomination Committee. Mr. Zhang graduated from Nanjing University
(南京大學), majoring in natural resources management, in July 1994 and a master’s degree in science
from James Madison University in the United States in May 2002. He has been chief executive officer
of The Paradise International Foundation since 2015. Mr. Zhang has been a project director of the
China region at The Nature Conservancy from 2005 to 2015.

Ms. Hui Chen (陳慧), aged 50, is an independent non-executive director and chairman of the
Audit Committee. Ms. Chen obtained a bachelor’s degree in business management and a master’s
degree in business management from Shanghai Jiao Tong University (上海交通大學) in June 1988 and
January 1991, respectively. Prior to joining the Company, she served as chief financial officer at
Huazhu Hotels Group between December 2014 and March 2016, and at Home Inns Group between
March 2003 and May 2006. She was financial controller of Beijing Ctrip International Travel Agency
Limited between December 1999 and February 2003.

Mr. Li Du (杜力), aged 36, is an independent non-executive director and a member of the
Remuneration and Nomination Committee. Mr. Du obtained a bachelor’s degree in economics from the
Tianjin Institute of Finance and Economics (天津財經學院) in July 2002 which was later re-named the
Tianjin University of Finance and Economics (天津財經大學) in 2004, a master’s degree in finance
from Peking University (北京大學) in July 2008 and an executive master of business administration
degree from the Cheung Kong Graduate School of Business (長江商學院) in October 2012. Mr. Du has
been a director of Guosheng Securities Co., Ltd. (國盛證券有限責任公司) since September 2016,
Guangzhou Tech-Long Packaging Machinery Co., Ltd. (廣州達意隆包裝機械股份有限公司) since
May 2016 and Guosheng Financial Holding Inc. (廣東國盛金控集團股份有限公司) since July 2015.

Mr. Yifan Li, aged 49, is an independent non-executive director and a member of the Audit
Committee. Mr. Li obtained a bachelor’s degree in economics from Fudan University (復旦大學) in
July 1989, a master’s degree in management and administration sciences from the University of Texas
at Dallas in May 1994 and a master of business administration degree from the University of Chicago
(Booth School of Business) in June 2000. Mr. Li has over 17 years of experience in finance. Mr. Li
has been a vice president of Zhejiang Geely Holding Group Co., Ltd. (浙江吉利控股集團有限公司)
since October 2014. Prior to that, Mr. Li served as a vice president and chief financial officer of
Sanpower Group Limited (三胞集團有限公司) between April 2014 and September 2014. Prior to that,
Mr. Li served as a vice president and chief financial officer of China Zenix Auto International Limited
(正興車輪集團有限公司) between December 2010 and February 2014. Mr. Li is a certified public
accountant in the United States and a member of the Chartered Institute of Management Accountants.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Ying Wu (吳鷹), aged 58, has been appointed as independent non-executive Director of the
Company and a member of the Risk Management Committee. Mr. Wu obtained a bachelor’s degree in
electronic engineering from the Beijing Institute of Technology (北京工業大學) in July 1982 and a
master’s degree in science from the New Jersey Institute of Technology in the United States in May
1988. Mr. Wu has over 30 years of experience in the telecom industry. Mr. Wu has been a director of
CN Capital Management Limited (中澤嘉盟投資有限公司) from October 2008. Mr. Wu is currently an
independent non-executive director of Zall Group Ltd. (SEHK: 2098), independent director of TCL
Corporation Ltd. (TCL集團股份有限公司) (SZSE: 000100), a company listed on the Shenzhen Stock
Exchange, and chairman of the board of supervisors of Huayi Brothers Media Corporation Ltd. (華誼
兄弟傳媒股份有限公司) (SZSE: 300027), a company listed on the Shenzhen Stock Exchange.

Save as disclosed herein (and their respective interests or short positions (if any) as set out in
the section headed “Appendix VI Statutory and General Information — Further Information about our
Directors and Supervisors”), there are no other matters in respect of each of our Directors that is
required to be disclosed pursuant to Rule 13.51(2)(a) to (v) of the Listing Rules and there is no other
material matter relating to our Directors that needs to be brought to the attention of our Shareholders.

SUPERVISORS

The board of Supervisors is responsible for monitoring our financial matters and supervising our
Board and members of our senior management. The following table sets out the information about our
Supervisors.

Date of joining Date of


Name Age Position Responsibilities the Company Appointment

Yuping Wen (溫玉萍) . . 36 Chairman of Board Exercising supervisory November 29, 2013 November 29, 2013
of Supervisors duties in accordance
with regulatory
requirements and the
Memorandum and
Articles of the
Company
Baoyan Gan (干寶雁) . . 42 Supervisor Exercising supervisory November 14, 2014 November 14, 2014
duties in accordance
with regulatory
requirements and the
Memorandum and
Articles of the
Company
Lei Xiang (向雷) . . . . . 37 Employee Exercising employee April 1, 2016 May 25, 2017
Representative representative
Supervisor supervisory duties in
accordance with
regulatory
requirements and the
Memorandum and
Articles of the
Company

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Ms. Yuping Wen (溫玉萍), aged 36, is the chairman of the board of Supervisors. Ms. Wen
obtained a master’s degree in management from the Xi’an University of Architecture and Technology
(西安建築科技大學) in July 2005. Ms. Wen has been a director and a supervisor in the financial affairs
department of Cnhooray Internet Technology Co., Ltd. (深圳日訊網絡科技股份有限公司) since 2010.

Ms. Baoyan Gan (干寶雁), aged 42, is a Supervisor. Ms. Gan obtained a bachelor’s degree in
engineering from Tongji University (同濟大學) in July 1997. Ms. Gan has worked in the president’s
office at Luminggu Consultancy Management Co., Ltd. (鹿鳴谷諮詢管理有限公司) since June 2015.
Prior to that, she worked in the president’s office at Unifront Holding Limited (優孚控股有限公司)
from March 2013.

Mr. Lei Xiang (向雷), aged 37, is the employee representative Supervisor. Mr. Xiang obtained
a bachelor’s degree in science from South-Central Institute for Nationalities (中南民族學院) in July
2000, which was later renamed South-Central University for Nationalities (中南民族大學). Mr. Xiang
worked in various positions at Kindee Software (China) Co., Ltd. (金蝶軟件(中國)有限公司) between
2000 and 2013, including positions as systems architect and product supervisor.

Save as disclosed herein (and their respective interests or short positions (if any) as set out in
the section headed “Appendix VI Statutory and General Information — Further Information about our
Directors and Supervisors”), there are no other matters in respect of each of our Supervisors that is
required to be disclosed pursuant to Rule 13.51(2)(a) to (v) of the Listing Rules and there is no other
material matter relating to our Supervisors that needs to be brought to the attention of our
Shareholders.

SENIOR MANAGEMENT

Our senior management is responsible for the day-to-day management of our business. The
following table sets out the information on the members of our senior management (besides our
executive Director).

Date of joining
Name Age Position Responsibilities the Company

Xing Jiang (姜興) . . . . . . . . . . . 40 Vice general manager Overseeing information April 1, 2014
and chief technology technology, operations &
officer safety
Wei Xu (許煒) . . . . . . . . . . . . . 37 Vice general manager Overseeing operations February 17, 2014
and chief operating
officer
Ti Wu (吳逖) . . . . . . . . . . . . . . 40 Vice general manager Overseeing marketing December 12, 2014
and chief marketing operations
officer
Yongbo Zhang (張勇博) . . . . . . . . 39 Chief legal officer and Overseeing compliance May 13, 2013
secretary of the Board
Huichuan Zhou (周會船) . . . . . . . 44 Finance director Overseeing financial June 10, 2013
operations

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Date of joining
Name Age Position Responsibilities the Company

Hui Teng (滕輝) . . . . . . . . . . . . 38 Actuary director Overseeing actuary May 15, 2013
operations
Min Wang (王敏) . . . . . . . . . . . . 32 Assistant general Overseeing strategic August 20, 2015
manager development
Strategic development
director
Mingyu Ma (馬明宇) . . . . . . . . . 44 Vice general manager Overseeing risk June 29, 2015
and chief risk management
management officer

Mr. Xing Jiang (姜興), aged 40, is the vice general manager and chief technology officer of our
Company and an executive director and legal representative of ZhongAn Information and Technology
Services Company Limited (眾安信息技術服務有限公司), a subsidiary of the Company. He is
primarily responsible for overseeing information technology, operations & safety of the Company. He
is also responsible for the health ecosystem, e-commerce ecosystem and insurance businesses of the
Company. Mr. Jiang obtained a bachelor’s degree in computer and applications from the Hunan
Finance and Economics Institute (湖南財經學院) in July 1999. He was in charge of the insurance
division at Zhejiang Rongxin Internet Technology Co., Ltd. (浙江融信網絡技術有限公司), which is
wholly-owned by Ant Financial, a substantial shareholder of the Company, from December 2013 to
March 2014. From January 2011 to March 2012, he was a senior director at Alibaba (China) Network
Technology Co., Ltd. (阿里巴巴(中國)網絡技術有限公司).

Mr. Wei Xu (許煒), aged 37, is the vice general manager and chief operating officer of our
Company. He is primarily responsible for overseeing products and operations at the Company in
addition to overseeing car, direct sales and travel insurance businesses of the Company. Mr. Xu
obtained a bachelor’s degree in computer communications from the Nanjing Institute of Posts and
Telecommunications (南京郵電學院) (now known as Nanjing University of Posts and
Telecommunications (南京郵電大學)) in July 2000. He then obtained a master’s degree in computer
software and theory from the Beijing University of Posts and Telecommunications (北京郵電大學) in
April 2003 and a master’s degree in business management from Tsinghua University (清華大學) in
June 2009. Mr. Xu has over 10 years of experience in internet product development and management.
He was a product manager at Google from May 2006 to February 2014. Prior to that he was a project
manager at China Mobile Communications Corporation (中國移動通信集團公司) from April 2003 to
May 2006.

Mr. Ti Wu (吳逖), aged 40, is the vice general manager and chief marketing officer of our
Company. He is primarily responsible for overseeing products, information management and financial
management of the Company in addition to overseeing consumer finance of the Company. Mr. Wu
obtained a bachelor’s degree in insurance studies from the Jiangxi University of Finance and
Economics (江西財經大學) in July 2000. He has over 10 years of insurance and management
experience. He was the deputy general manager of the product research and development department
of Shanghai Lujiazui International Financial Trading Market Co., Ltd. (上海陸家嘴國際金融交易市場
股份有限公司) from 2010 to 2014 and of the membership management department from July 2012 to
December 2014. He was the deputy general manager of the marketing department from April 2009 to
July 2011 and was the head of the chairman’s office from June 2007 to April 2009 at Ping An Insurance
(Group) Co., Ltd (中國平安財產保險股份有限公司).

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Yongbo Zhang (張勇博), aged 39, is the chief legal officer and secretary of the Board of our
Company. He is primarily responsible for overseeing compliance and legal affairs, internal control and
corporate governance of the Company. Mr. Zhang obtained a master’s degree in international
economic law from the East China University of Political Science and Law (華東政法大學) in
December 2007. Mr. Zhang served as a legal officer of Yongcheng Property Insurance Co., Ltd
(永誠財產保險股份有限公司) between 2011 and 2013. Prior to that, he was involved in compliance
matters at Manulife-Sinochem Life Co., Ltd. (中宏人壽保險有限公司) from February 2007 to
February 2011. Mr. Zhang has been an accredited lawyer in the PRC since March 2001.

Mr. Huichuan Zhou (周會船), aged 44, is the finance director of our Company. He is primarily
responsible for overseeing the financial operations of the Company. Mr. Zhou obtained a master’s
degree in finance from Graduate School of Chinese Academy of Social Sciences (中國社會科學院研
究生院) in April 2001. Mr. Zhou was the division head of the finance and accounting department of
China Continent Property & Casualty Insurance Co., Ltd (中國大地財產保險股份有限公司) from June
2003 to May 2012. Prior to that, Mr. Zhou was the vice manager of the finance and accounting
department of China Reinsurance (Group) Corporation (Shanghai branch) (中國再保險集團股份有限
公司上海分公司) from January 2002 to October 2003. Mr. Zhou has been admitted as a member of the
Chinese Institute of Certified Public Accountants (中國註冊會計師協會) in May 1998, a Certified
Enterprise Risk Manager for the Asia Association of Risk and Crisis Management since February
2012, a chief financial officer by the China Association of Chief Financial Officers
(中國總會計師協會) since March 2010, a fellow of the Institute of Public Accountants since April
2016 and a fellow of the Institute of Financial Accountants since April 2016.

Mr. Hui Teng (滕輝), aged 38, is the actuary director of our Company. He is primarily
responsible for overseeing the actuary and re-insurance operations of the Company. Mr. Teng obtained
a bachelor’s degree in science in June 2001 and a master’s degree in economics in June 2004 from
Fudan University (復旦大學). Mr. Teng has worked as an actuary at Sompo Japan Insurance (China)
Limited (日本財產保險(中國)股份有限公司) from November 2008 to May 2013 and worked as chief
actuary at Tianan Company Ltd. (天安保險股份有限公司) from February 2006 to September 2008. Mr.
Teng has been an actuary accredited by the China Insurance Regulatory Commission
(中國保險監督管理委員) since April 2008.

Mr. Min Wang (王敏), aged 32, is currently the assistant general manager and the strategic
development director of our Company, in charge of the strategic development center and new business
incubation work. He obtained a bachelor’s degree in economics and master’s degree in economics
from Nankai University (南開大學) in July 2008 and July 2010 respectively. He has worked in
insurance supervision at the CIRC, and was involved in the development of a number of insurance
regulatory measures.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Mingyu Ma (馬明宇), aged 44, is the vice general manager and chief management risk
officer of our Company, and is responsible for overseeing risk management. He obtained a master of
business administration from the Smith School of Business at the University of Maryland in June
2006, a master of laws from the Renmin University of China in July 1999 and a bachelor’s degree in
law from Inner Mongolia University School of Law (內蒙古大學法學院) in July 1993. From August
2014 to June 2015, he was the general manager of the risk management department of Huabao Trust
Co., Ltd. (華寶信託公司). From September 2006 to March 2012, he was an operations officer to the
East Asian and Pacific region of the International Finance Corporation (IFC) of the World Bank
Group.

Save as disclosed herein, to the best of the knowledge, information and belief of our Directors,
having made all reasonable enquiries, there are no other matters relating to the appointment of our
senior management members that need to be brought to the attention of our Shareholders and none of
our senior management members held any directorship in any public companies the securities of which
are listed on any securities market in Hong Kong or overseas in the last three years immediately
preceding the date of this prospectus. As at the Latest Practicable Date, none of our senior
management members had any interest in our Shares within the meaning of Part XV of the SFO.

JOINT COMPANY SECRETARY

Mr. Yongbo Zhang (張勇博) and Ms. Ella Wai Yee Wong (黃慧兒) have been both appointed as
the joint company secretaries of our Company upon Listing. See disclosure in “— Senior
Management” in this section for the biography of Mr. Zhang.

Ms. Ella Wai Yee Wong, is a Senior Manager of Corporate Services of Tricor Services Limited
(“Tricor”), a global professional services provider specializing in integrated Business, Corporate and
Investor Services.

Ms. Wong has over 15 years of experience in the corporate services field. She has been providing
professional corporate services to Hong Kong listed companies as well as multinational, private and
offshore companies. She is currently the company secretary/ joint company secretary of two listed
companies on The Stock Exchange namely, China Minsheng Banking Corp., Ltd. (中國民生銀行股份
有限公司) (SEHK: 1988) and Vedan International (Holdings) Limited (味丹國際(控股)有限公司)
(SEHK: 2317). Ms. Wong is a Chartered Secretary and an Associate of both The Hong Kong Institute
of Chartered Secretaries (“HKICS”) and The Institute of Chartered Secretaries and Administrators
(“ICSA”) in the United Kingdom. Ms. Wong holds a Bachelor of Economics from The University of
Hong Kong and a Postgraduate Diploma in Corporate Administration from the City University of Hong
Kong.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

BOARD COMMITTEES

Risk Management and Audit Committees

We have established the risk management and audit committees with written terms of reference
in compliance with Rule 3.21 of the Listing Rules and paragraph C.3 of the Corporate Governance
Code set out in Appendix 14 to the Listing Rules. The primary responsibilities of our risk management
and audit committees are to supervise our risk management, internal control system, financial
information disclosure and financial reporting matters, which include, among other things:

• proposing appointment, re-appointment or removal of external auditors;

• reviewing and monitoring the external auditors’ independence and objectivity and the
effectiveness of the audit process in accordance with applicable standards;

• reviewing the financial information of the Company;

• overseeing the financial reporting system and internal control procedures of the Company;

• reviewing the risk management and internal control systems of the Company;

• enhancing the communication between internal auditors and external auditors; and

• reviewing arrangements which our Group’s employees can use, in confidence, to raise
concerns about possible improprieties in financial reporting, internal control or other
matters.

The audit committee comprises Mr. Guoping Wang, Mr. Yifan Li and Ms. Hui Chen; it is chaired
by Ms. Hui Chen. The risk management committee comprises Mr. Ying Wu, Mr. Fang Zheng and Mr.
Xiaoming Hu; it is chaired by Mr. Fang Zheng.

Remuneration and Nomination Committee

We have established the remuneration and nomination committee with written terms of reference
in compliance with Rule 3.25 of the Listing Rules and paragraphs A.5 and B.1 of the Corporate
Governance Code set out in Appendix 14 to the Listing Rules. The primary responsibilities of our
remuneration and nomination committee include, among others, the following:

• researching and recommending to the Board on the Company’s remuneration structure and
policy for all Directors, Supervisors and senior management;

• determining, with delegated responsibility from the Board, or recommending to the Board
the remuneration packages of individual executive Directors and members of the senior
management;

• recommending to the Board on the remuneration of the non-executive Directors;

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

• reviewing and approving compensation arrangements relating to dismissal or removal of


Directors for misconduct;

• monitoring the implementation of remuneration policies of Directors, Supervisors and


senior management;

• reviewing the structure, size and composition of the Board annually and making
recommendations on any proposed changes to the Board to complement the Company’s
corporate strategy;

• identifying individuals suitably qualified to become Directors, selecting or recommending


to the Board on the selection of individuals nominated for directorships or providing advice
to the Board in respect thereof; and

• making recommendations to the Board on the appointment or re-appointment of Directors


and the succession planning for Directors.

The remuneration and nomination committee comprises Mr. Yaping Ou, Mr. Shuang Zhang and
Mr. Li Du and is chaired by Mr. Shuang Zhang.

Investment Strategy Committee

We have established the investment strategy committee. The primary responsibilities of our
investment strategy committee include, among others, the following:

• to consider the management system for the use of insurance funds and to make
recommendations to the Board;

• to make recommendations to the board of directors on the management of the use of


insurance funds;

• to consider investment decision-making procedures and authorize mechanisms and make


recommendations to the Board;

• to consider asset strategic allocation planning, annual investment plan and investment
guidance and related adjustment plan;

• to consider major investment matters and make recommendations to the Board;

• to consider the investment strategy and operation plan of the new investment variety and
make recommendations to the Board;

• to consider the use of performance appraisal system and submit recommendations to the
Board;

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

• to consider the relevant management system of insurance assets and liabilities, and to
establish and improve the management mechanism of assets and liabilities of the Company;
and

• to promote the establishment of periodic risk analysis mechanism to prevent the risk of
asset and liability mismatch.

The investment strategy committee comprises Mr. Jin Chen, Mr. Xinyi Han, Mr. Jimmy Chi Ming
Lai and Mr. Hugo Jin Yi Ou. It is chaired by Mr. Jin Chen.

REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

The remuneration of our Directors and Supervisors (including fees, salaries, discretionary bonus,
contributions to defined contribution benefit plans (including pension), housing and other allowances,
as well as other benefits in kind) during the Track Record Period were approximately RMB1.7 million,
RMB6.8 million, RMB3.4 million and RMB0.8 million, respectively.

The aggregate amount of fees, salaries, discretionary bonus, contributions to defined


contribution benefit plans (including pension), housing and other allowances, as well as other benefits
in kind paid to our five highest paid individuals of the Company for each of the financial years during
the Track Record Period were approximately RMB4.8 million, RMB17.2 million, RMB9.6 million and
RMB2.2 million, respectively.

We have not paid any remuneration to our Directors or Supervisors or the five highest paid
individuals as an inducement to join us or as a compensation for loss of office in respect of the Track
Record Period. Furthermore, none of our Directors or Supervisors had waived any remuneration
during the same period.

According to the arrangements in force on the Latest Practicable Date, we expect that the total
remuneration to be paid and granted to our Directors and Supervisors for 2017 will be approximately
RMB3.3 million.

Save as disclosed above, there was no other amount paid or payable to the Directors by the
Company or any of our subsidiaries for the Track Record Period.

DIRECTORS’ AND SUPERVISORS’ INTERESTS

Save as disclosed in “Directors, Supervisors and Senior Management” section of this prospectus,
each of our Directors and Supervisors (i) did not hold other positions in the Company or other
members of our Group as at the Latest Practicable Date; (ii) had no other relationship with any
Directors, senior management or substantial or controlling shareholders of the Company as of the
Latest Practicable Date; and (iii) did not hold any directorship in any other listed companies in the
three years prior to the Latest Practicable Date. As of the Latest Practicable Date, save as disclosed
in the section “Statutory and General Information — 5. Disclosure of Interests — A. Disclosure of
Interests” in Appendix VI to this prospectus, each of our Directors and Supervisors did not have any
interest in the H Shares or the Domestic Shares within the meaning of Part XV of the SFO.

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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

COMPLIANCE ADVISER

We have appointed Somerley Capital Limited as our compliance adviser pursuant to Rule 3A.19
of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, our compliance adviser will advise
us in the following circumstances:

• before the publication of any regulatory announcement, circular or financial report;

• where a transaction, which might be a notifiable or connected transaction (as defined under
the Listing Rules), is contemplated, including share issues and share repurchases;

• where we propose to use the proceeds of the Global Offering in a manner apart from that
detailed in this prospectus or where our business activities, developments or results deviate
from any forecast, estimate or other information in this prospectus; and

• where the Hong Kong Stock Exchange makes an inquiry of us regarding unusual
movements in the price or trading volume of our Shares.

The term of the appointment shall commence on the Listing Date and end on the date on which
we distribute our annual report in respect of our financial results for the first full financial year
commencing after the Listing Date, and such appointment may be subject to extension by mutual
agreement.

— 327 —
SHARE CAPITAL

As of the Latest Practicable Date, the registered capital of the Company is RMB1,240,625,000,
comprising 1,000,000,000 Domestic Shares and 240,625,000 Foreign Shares, representing 80.6045%
and 19.3955% of the total share capital of the Company, and particulars of the Company’s
shareholdings are as follows:

Approximate
percentage of total
Shareholder Nature of interest Class Number of Shares share capital

Ant Financial . . . . . . . . . . . . Legal and Domestic 199,000,000 16.0403%


beneficial interest
Tencent Computer System . . . Legal and Domestic 150,000,000 12.0907%
beneficial interest
Ping An Insurance . . . . . . . . . Legal and Domestic 150,000,000 12.0907%
beneficial interest
Shenzhen Jia De Xin Legal and Domestic 140,000,000 11.2846%
Investment Limited . . . . . . beneficial interest
Unifront Holding Limited . . . . Legal and Domestic 90,000,000 7.2544%
beneficial interest
Cnhooray Internet Technology Legal and Domestic 81,000,000 6.5290%
Co. Ltd. . . . . . . . . . . . . . . . beneficial interest
Qingdao Huilijun Trading Legal and Domestic 50,000,000 4.0302%
Company Limited . . . . . . . . beneficial interest
Shanghai Yuanqiang Legal and Domestic 50,000,000 4.0302%
Investment Company beneficial interest
Limited . . . . . . . . . . . . . . . .
Shenzhen Rixun Internet Co., Legal and Domestic 30,000,000 2.4182%
Ltd. . . . . . . . . . . . . . . . . . . . beneficial interest
Morgan Stanley Asia Legal and Foreign 30,730,833 2.4770%
Securities Products LLC . . . beneficial interest
CICC Securities (HK) Legal and Foreign 31,250,000 2.5189%
Limited . . . . . . . . . . . . . . . . beneficial interest
CDH Avatar, L.P. . . . . . . . . . . Legal and Foreign 62,000,000 4.9975%
beneficial interest
Keywise ZA Investment . . . . . Legal and Foreign 61,189,167 4.9321%
beneficial interest
Equine Forces Limited Legal and Foreign 55,455,000 4.4699%
Partnership . . . . . . . . . . . . . beneficial interest
Shanghai Haoguan Investment Legal and Domestic 28,570,000 2.3029%
Management Partnership beneficial interest
(Limited Partnership) . . . . .
Shanghai Qianguo Investment Legal and Domestic 31,430,000 2.5334%
Management Partnership beneficial interest
(Limited Partnership) . . . . .
Total . . . . . . . . . . . . . . . . . . . 1,240,625,000 100.0000%

— 328 —
SHARE CAPITAL

Immediately following completion of the Global Offering and conversion of the Foreign Shares,
assuming the Over-Allotment Option is not exercised, the registered capital of the Company will be
RMB1,439,918,900, comprising 439,918,900 H Shares, and 1,000,000,000 Domestic Shares,
representing approximately 30.5516% and 69.4484%, respectively, of the total share capital of the
Company, and particulars of the Company’s shareholdings will be as follows:

Approximate
percentage of total
Shareholder Class Number of Shares share capital

Ant Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic 199,000,000 13.8202%


Tencent Computer System . . . . . . . . . . . . . . . . . . Domestic 150,000,000 10.4173%
Ping An Insurance . . . . . . . . . . . . . . . . . . . . . . . . Domestic 150,000,000 10.4173%
Shenzhen Jia De Xin Investment Limited . . . . . . . Domestic 140,000,000 9.7228%
Unifront Holding Limited . . . . . . . . . . . . . . . . . . . Domestic 90,000,000 6.2504%
Cnhooray Internet Technology Co. Ltd. . . . . . . . . Domestic 81,000,000 5.6253%
Qingdao Huilijun Trading Company Limited . . . . . Domestic 50,000,000 3.4724%
Shanghai Yuanqiang Investment Company Domestic 50,000,000 3.4724%
Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shenzhen Rixun Internet Co., Ltd. . . . . . . . . . . . . Domestic 30,000,000 2.0835%
Shanghai Haoguan Investment Management Domestic 28,570,000 1.9841%
Partnership (Limited Partnership) . . . . . . . . . . .
Shanghai Qianguo Investment Management Domestic 31,430,000 2.1828%
Partnership (Limited Partnership) . . . . . . . . . . .
Morgan Stanley Asia Securities Products LLC . . . H Share 30,730,833 2.1342%
CICC Securities (HK) Limited . . . . . . . . . . . . . . . H Share 31,250,000 2.1703%
CDH Avatar, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . H Share 62,000,000 4.3058%
Keywise ZA Investment . . . . . . . . . . . . . . . . . . . . H Share 61,189,167 4.2495%
Equine Forces Limited Partnership . . . . . . . . . . . . H Share 55,455,000 3.8513%
H Shares issued pursuant to the Global Offering . H Share 199,293,900 13.8406%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,439,918,900 100.0000%

— 329 —
SHARE CAPITAL

Immediately following completion of the Global Offering and conversion of the Foreign Shares,
assuming the Over-Allotment Option is exercised in full, the registered capital of the Company will
be RMB1,469,812,900, comprising 469,812,900 H Shares and 1,000,000,000 Domestic Shares,
representing approximately 31.9641% and 68.0359%, respectively, of the total share capital of the
Company, and particulars of the Company’s shareholdings will be as follows:

Approximate
percentage of total
Shareholder Class Number of Shares share capital

Ant Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic 199,000,000 13.5391%


Tencent Computer System . . . . . . . . . . . . . . . . . . Domestic 150,000,000 10.2054%
Ping An Insurance . . . . . . . . . . . . . . . . . . . . . . . . Domestic 150,000,000 10.2504%
Shenzhen Jia De Xin Investment Limited . . . . . . . Domestic 140,000,000 9.5250%
Unifront Holding Limited . . . . . . . . . . . . . . . . . . . Domestic 90,000,000 6.1232%
Cnhooray Internet Technology Co. Ltd. . . . . . . . . Domestic 81,000,000 5.5109%
Qingdao Huilijun Trading Company Limited . . . . . Domestic 50,000,000 3.4018%
Shanghai Yuanqiang Investment Company Domestic 50,000,000 3.4018%
Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shenzhen Rixun Internet Co., Ltd. . . . . . . . . . . . . Domestic 30,000,000 2.0411%
Shanghai Haoguan Investment Management Domestic 28,570,000 1.9438%
Partnership (Limited Partnership) . . . . . . . . . . .
Shanghai Qianguo Investment Management Domestic 31,430,000 2.1384%
Partnership (Limited Partnership) . . . . . . . . . . .
Morgan Stanley Asia Securities Products LLC . . . H Share 30,730,833 2.0908%
CICC Securities (HK) Limited . . . . . . . . . . . . . . . H Share 31,250,000 2.1261%
CDH Avatar, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . H Share 62,000,000 4.2182%
Keywise ZA Investment . . . . . . . . . . . . . . . . . . . . H Share 61,189,167 4.1631%
Equine Forces Limited Partnership . . . . . . . . . . . . H Share 55,455,000 3.7729%
H Shares issued pursuant to the Global Offering . H Share 229,187,900 15.5930%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,469,812,900 100.0000%

OUR SHARES

Upon completion of the Global Offering and conversion of the Foreign Shares into H Shares, we
would have two classes of Shares: Domestic Shares and H Shares. The H Shares in issue following
the completion of the Global Offering and Domestic Shares are ordinary Shares in the share capital
of the Company. However, apart from certain qualified domestic institutional investors in the PRC, H
Shares generally may not be subscribed for by, or traded between, legal or natural persons of the PRC.
On the other hand, Domestic Shares may only be subscribed for by, and traded between, legal persons
of the PRC, certain qualified foreign institution investors and qualified foreign strategic investors. H
Shares may only be subscribed for and traded in Hong Kong dollars. Domestic Shares, on the other
hand, may only be subscribed for and transferred in Renminbi.

— 330 —
SHARE CAPITAL

Domestic Shares and H Shares are regarded as different classes of shares under our Articles of
Association. The differences between Domestic Shares and H Shares, and the provisions on class
rights, the dispatch of notices and financial reports to Shareholders, dispute resolution, registration of
Shares on different registers of Shareholders, the method of Share transfer, appointment of dividend
receiving agents and circumstances under which general meeting and class meeting are required are
set out in our Articles of Association and summarised in “Appendix V — Summary of Articles of
Association”. Under our Articles of Association, the rights conferred on any class of Shareholders may
not be varied or abrogated unless approved by a special resolution of the general meeting of
Shareholders and by the affected Shareholders at a separate meeting. The circumstances deemed to be
a variation or abrogation of the rights of class Shareholders are listed in “Appendix V — Summary of
Articles of Association”. However, the procedures for approval by separate classes of Shareholders do
not apply (i) where we issue, upon approval by a special resolution of the Shareholders in a general
meeting, either separately or concurrently once every 12 months, Shares representing no more than
20% of each of the existing issued Domestic Shares and H Shares; (ii) where our plan to issue
Domestic Shares and H Shares at the time of our establishment is implemented within 15 months from
the date of approval of the securities regulatory authorities of the State Council; or (iii) where the
conversion of Domestic Shares for listing and trading on the Hong Kong Stock Exchange as H Shares
has been approved by securities regulatory authorities of the State Council.

Save as disclosed in this prospectus, our Promoters hold all existing Domestic Shares as
promoter shares (as defined in the PRC Company Law). Under the PRC Company Law, promoter
shares may not be sold within a period of one year from the Listing Date.

RANKING

Except for the differences set out in “— Our Shares” above, Domestic Shares and H Shares will
rank pari passu with each other in all other respects and, in particular, will rank equally for all
dividends or distributions declared, paid or made after the date of this prospectus. All dividends in
respect of the H Shares are to be paid by us in Hong Kong dollars whereas all dividends in respect
of Domestic Shares are to be paid by us in Renminbi. In addition to cash, dividends may be distributed
in the form of Shares. For holders of H Shares, dividends in the form of Shares will be distributed in
the form of additional H Shares. For holders of Domestic Shares, dividends in the form of Shares will
be distributed in the form of additional Domestic Shares.

CONVERSION OF OUR DOMESTIC SHARES INTO H SHARES

According to the regulations by the securities regulatory authorities of the State Council and our
Articles of Association, the Domestic Shares may be converted into H Shares, and such converted
Shares may be listed and traded on an overseas stock exchange provided that the conversion, listing
and trading of such converted Shares have been approved by the securities regulatory authorities of
the State Council. In addition, such conversion, trading and listing shall complete any requisite
internal approval process and comply with the regulations prescribed by the securities regulatory
authorities of the State Council and the regulations, requirements and procedures prescribed by the
relevant overseas stock exchange.

— 331 —
SHARE CAPITAL

If any of the Domestic Shares are to be converted, listed and traded as H Shares on the Hong
Kong Stock Exchange, such conversion, listing and trading will need the approval of the relevant PRC
regulatory authorities, including the CSRC, and the approval of the Hong Kong Stock Exchange.
Based on the procedures for the conversion of Domestic Shares into H Shares as described below, we
may apply for the listing of all or any portion of the Domestic Shares on the Hong Kong Stock
Exchange as H Shares in advance of any proposed conversion to ensure that the conversion process
can be completed promptly upon notice to the Hong Kong Stock Exchange and delivery of Shares for
entry on the H Share register. As any listing of additional Shares after our initial listing on the Hong
Kong Stock Exchange is ordinarily considered by the Hong Kong Stock Exchange to be a purely
administrative matter, it does not require such prior application for listing at the time of our initial
listing in Hong Kong. Class shareholder voting is not required for the conversion of such Shares or
the listing and trading of such converted Shares on an overseas stock exchange.

The relevant procedural requirements for the conversion of Domestic Shares into H Shares are
as follows:

• The holder of Domestic Shares shall obtain the requisite approval of the CSRC or the
authorised securities regulatory authorities of the State Council for the conversion of all or
part of its Domestic Shares into H Shares.

• The holder of Domestic Shares shall issue to us a removal request in respect of a specified
number of Shares attaching the relevant documents of title.

• Subject to the Company being satisfied with the authenticity of the documents and with the
approval of our Board, we would then issue a notice to our H Share Registrar with
instructions that, with effect from a specified date, our H Share Registrar is to issue the
relevant holders with H Share certificates for such specified number of Shares.

• The relevant Domestic Shares will be withdrawn from the Domestic Shares register and
re-registered on our H Share register maintained in Hong Kong on the condition that:

— our H Share Registrar lodges with the Hong Kong Stock Exchange a letter confirming
the proper entry of the relevant Shares on the H Share register and the due dispatch
of Share certificates; and

— the admission of the H Shares (converted from the Domestic Shares) to trade in Hong
Kong will comply with the Listing Rules and the General Rules of CCASS and CCASS
Operational Procedures in force from time to time.

• Upon completion of the conversion, the shareholding of the relevant holder of Domestic
Shares in our Domestic Share register will be reduced by such number of Domestic Shares
converted and the number of H Shares in the H Share register will correspondingly increase
by the same number of Shares.

• We will comply with the Listing Rules to inform Shareholders and the public by way of an
announcement of such fact not less than three days prior to the proposed effective date.

— 332 —
SHARE CAPITAL

CONVERSION OF FOREIGN SHARES HELD BY THE PRE-IPO INVESTORS

Upon completion of the Global Offering, 240,625,000 Foreign Shares in aggregate held by the
Pre-IPO Investors will be converted into H Shares on a one-for-one basis.

The Conversion of these Foreign Shares into H Shares was approved by CSRC on August 31,
2017 and an application has been made to the Listing Committee for such H Shares to be listed on the
Hong Kong Stock Exchange.

TRANSFER OF SHARES PRIOR TO THE GLOBAL OFFERING

Pursuant to the PRC Company Law, our Shares issued prior to the Listing shall not be transferred
within one year from the Listing Date.

— 333 —
SUBSTANTIAL SHAREHOLDERS

To the best knowledge of our Directors, the following persons will, immediately after the
completion of the Global Offering (assuming the Over-allotment Option is not exercised), have an
interest or short position in the Shares or underlying shares which are required to be disclosed to the
Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV
of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class
of share capital carrying the rights to vote in all circumstances at the general meetings of the
Company:

(a) Interest in the Shares of our Company

Approximate Approximate
Approximate percentage of percentage of
percentage of shareholding in shareholding in
shareholding in the total share the total share
the relevant capital of our capital of our
class of Shares Company Company
Approximate immediately immediately immediately
percentage of following following following
shareholding in the Global the Global the Global
Number of the total share Offering Offering Offering
Shares held capital of our (assuming Over- (assuming Over- (assuming Over-
immediately Company as at allotment allotment allotment
following the Nature of the date of this Option is not Option is not Option is fully
Shareholder Global Offering interest prospectus exercised) exercised) exercised)

Ant Financial 199,000,000 Beneficial 16.0403% 19.9000% 13.8202% 13.5391%


(浙江小微金融服務集團股份 Domestic Shares interest
有限公司) (Note 1) . . . . . . .

Hangzhou Junao Investments 199,000,000 Interest in a 16.0403% 19.9000% 13.8202% 13.5391%


(Limited Partnership) Domestic Shares controlled
(杭州君澳股權投資合夥企業 corporation
(有限合夥)) (Note 1) . . . . .

Hangzhou Junhan Investments 199,000,000 Interest in a 16.0403% 19.9000% 13.8202% 13.5391%


(Limited Partnership) Domestic Shares controlled
(杭州君瀚股權投資合夥企業 corporation
(有限合夥)) (Note 1) . . . . .

Hangzhou Yunbo Investment 199,000,000 Interest in a 16.0403% 19.9000% 13.8202% 13.5391%


Consulting Co., Ltd. Domestic Shares controlled
(杭州雲鉑投資諮詢有限 corporation
公司) (Note 1) . . . . . . . . .
(Note 1)
Jack Ma (馬雲) . . . . . 199,000,000 Interest in a 16.0403% 19.9000% 13.8202% 13.5391%
Domestic Shares controlled
corporation

Tencent Computer System 150,000,000 Beneficial 12.0907% 15.0000% 10.4173% 10.2054%


(深圳市騰訊計算機系統有限 Domestic Shares interest
公司) (Note 2) . . . . . . . . .
(Note 2)
Huateng Ma (馬化騰) . 150,000,000 Interest in a 12.0907% 15.0000% 10.4173% 10.2054%
Domestic Shares controlled
corporation

— 334 —
SUBSTANTIAL SHAREHOLDERS

Approximate Approximate
Approximate percentage of percentage of
percentage of shareholding in shareholding in
shareholding in the total share the total share
the relevant capital of our capital of our
class of Shares Company Company
Approximate immediately immediately immediately
percentage of following following following
shareholding in the Global the Global the Global
Number of the total share Offering Offering Offering
Shares held capital of our (assuming Over- (assuming Over- (assuming Over-
immediately Company as at allotment allotment allotment
following the Nature of the date of this Option is not Option is not Option is fully
Shareholder Global Offering interest prospectus exercised) exercised) exercised)

Tencent Holdings Limited 150,000,000 Interest in a 12.0907% 15.0000% 10.4173% 10.2054%


(Note 2)
. . . . . . . . . . . . Domestic Shares controlled
corporation
(Note 3)
Ping An Insurance . . . 150,000,000 Beneficial 12.0907% 14.0000% 10.4173% 10.2054%
Domestic Shares interest

Shenzhen Jia De Xin 140,000,000 Beneficial 11.2846% 14.0000% 9.7228% 9.5250%


Investment Limited Domestic Shares interest
(深圳市加德信投資有限
(Note 4)
公司) . . . . . . . . .

Shenzhen Huaxinlian 140,000,000 Interest in a 11.2846% 14.0000% 9.7228% 9.5250%


Investment Limited Domestic Shares controlled
(深圳市華信聯投資有限 corporation
(Note 4)
公司) . . . . . . . . .
(Note 4)
Ou Yafei (歐亞非) . . . 140,000,000 Interest in a 11.2846% 14.0000% 9.7228% 9.5250%
Domestic Shares controlled
corporation

Unifront Holding Limited 90,000,000 Beneficial 7.2544% 9.0000% 6.2504% 6.1232%


(優孚控股有限 Domestic Shares interest
(Note 5)
公司) . . . . . . . . .

Shanghai Songlu Investment 90,000,000 Interest in a 7.2544% 9.0000% 6.2504% 6.1232%


Management Co., Ltd. Domestic Shares controlled
(上海松鹿投資管理有限 corporation
(Note 5)
公司) . . . . . . . . .

Shanghai Jianglu Investment 90,000,000 Interest in a 7.2544% 9.0000% 6.2504% 6.1232%


Management Co., Ltd. Domestic Shares controlled
(上海江鹿投資管理有限 corporation
(Note 5)
公司) . . . . . . . . .

Shanghai Xinlu Investment 90,000,000 Interest in a 7.2544% 9.0000% 6.2504% 6.1232%


Management Co., Ltd. Domestic Shares controlled
(上海鑫鹿投資管理有限 corporation
(Note 5)
公司) . . . . . . . . .

— 335 —
SUBSTANTIAL SHAREHOLDERS

Approximate Approximate
Approximate percentage of percentage of
percentage of shareholding in shareholding in
shareholding in the total share the total share
the relevant capital of our capital of our
class of Shares Company Company
Approximate immediately immediately immediately
percentage of following following following
shareholding in the Global the Global the Global
Number of the total share Offering Offering Offering
Shares held capital of our (assuming Over- (assuming Over- (assuming Over-
immediately Company as at allotment allotment allotment
following the Nature of the date of this Option is not Option is not Option is fully
Shareholder Global Offering interest prospectus exercised) exercised) exercised)

Shanghai Youlu Investment 90,000,000 Interest in a 7.2544% 9.0000% 6.2504% 6.1232%


Management Co., Ltd. Domestic Shares controlled
(上海游鹿投資管理有限 corporation
(Note 5)
公司) . . . . . . . . .
(Note 5)
Zhang Zhen (張真) . . . 90,000,000 Interest in a 7.2544% 9.0000% 6.2504% 6.1232%
Domestic Shares controlled
corporation

Cnhooray Internet Technology 81,000,000 Beneficial 6.5290% 8.1000% 5.6253% 5.5109%


Co. Ltd. (深圳日訊網絡 Domestic Shares interest
(Note 6)
科技股份有限公司) .

Timeway Holdings Limited 81,000,000 Interest in a 6.5290% 8.1000% 5.6253% 5.5109%


(Note 6)
(中宇集團有限公司) . Domestic Shares controlled
corporation

Sinolink Worldwide Holdings 81,000,000 Interest in a 6.5290% 8.1000% 5.6253% 5.5109%


Limited (香港百仕達控股 Domestic Shares controlled
(Note 6)
有限公司) . . . . . . corporation

Morgan Stanley Asia Securities 30,730,833 H Beneficial 2.4770% 6.9856% 2.1342% 2.0908%
(Note 7)
Products LLC . . . . Share interest

CICC Securities (HK) Limited 31,250,000 H Beneficial 2.5189% 7.1036% 2.1703% 2.1261%
(Note 8)
. . . . . . . . . . . . Share interest
(Note 9)
CDH Avatar, L.P. . . . . 62,000,000 H Beneficial 4.9975% 14.0935% 4.3058% 4.2182%
Share interest
(Note
Keywise ZA Investment 61,189,167 H Beneficial 4.9321% 13.9092% 4.2495% 4.1631%
10) . . . . . . . . . . . . . . Share interest

Equine Forces Limited 55,455,000 H Beneficial 4.4699% 12.6057% 3.8513% 3.7729%


(Note 11)
Partnership . . . . . Share interest
(Note 12)
Softbank Group Corp. 71,909,800 H Beneficial — 16.3461% 4.9940% 4.8924%
Share interest

Notes
(1) Hangzhou Junao Investments (Limited Partnership) (杭州君澳股權投資合夥企業(有限合夥)) holds 34.15% shares in
Ant Financial, and Hangzhou Junhan Investments (Limited Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) holds
42.28% shares in Ant Financial. As such, Hangzhou Junao Investments (Limited Partnership) (杭州君澳股權投資合夥企

— 336 —
SUBSTANTIAL SHAREHOLDERS

業(有限合夥)) and Hangzhou Junhan Investments (Limited Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) will


be deemed to be interested in the Shares held by Ant Financial upon Listing. The voting rights of Hangzhou Junao
Investments (Limited Partnership) (杭州君澳股權投資合夥企業(有限合夥)) and Hangzhou Junhan Investments
(Limited Partnership) (杭州君瀚股權投資合夥企業(有限合夥)) are controlled by Hangzhou Yunbo Investment
Consulting Co., Ltd. (杭州雲鉑投資諮詢有限公司) which in turn is entirely owned by Jack Ma (馬雲). As such,
Hangzhou Yunbo Investment Consulting Co., Ltd. (杭州雲鉑投資諮詢有限公司) and Jack Ma (馬雲) will be deemed to
be interested in the Shares held by Ant Financial upon Listing.
(2) Tencent Computer System is a consolidated affiliated entity (through contractual arrangements) of Tencent Holdings
Limited, a company listed on the Main Board on the Stock Exchange (SEHK: 0700), and is one of its principal PRC
domestic operating entities. Tencent Computer System is a leading provider of internet value added services in China and
is a clear holder of our Shares. As such, Tencent Holdings Limited will be deemed to be interested in the Shares held
by Tencent Computer System upon Listing. Ma Huateng (馬化騰) holds 54.29% shares in Tencent Computer System.
(3) Ping An Insurance is a joint-stock company incorporated in the PRC and listed on Main Board of the Stock Exchange
(SEHK: 02318) and the Shanghai Stock Exchange (SSE: 601318).
(4) Shenzhen Jia De Xin Investment Limited (深圳市加德信投資有限公司) is a subsidiary of Shenzhen Huaxinlian
Investment Co., Ltd. (深圳市華信聯投資有限公司). As such, Shenzhen Huaxinlian Investment Co., Ltd.
(深圳市華信聯投資有限公司) will be deemed to be interested in the Shares held by Shenzhen Jia De Xin Investment
Limited (深圳市加德信投資有限公司) upon Listing. Shenzhen Huaxinlian Investment Co., Ltd.
(深圳市華信聯投資有限公司) is controlled by Ou Yafei (歐亞非). As such, Ou Yafei (歐亞非) will be deemed to be
interested in the Shares held by Shenzhen Jia De Xin Investment Limited (深圳市加德信投資有限公司) upon Listing.
(5) Unifront Holding Limited (優孚控股有限公司) is owned by Shanghai Songlu Investment Management Co., Ltd. (上海松
鹿投資管理有限公司) as to 25%, Shanghai Jianglu Investment Management Co., Ltd. (上海江鹿投資管理有限公司) as
to 16.88% and Shanghai Xinlu Investment Management Co., Ltd. (上海鑫鹿投資管理有限公司) as to 13.12%. The entire
interest of Shanghai Songlu Investment Management Co., Ltd. (上海松鹿投資管理有限公司), Shanghai Jianglu
Investment Management Co., Ltd. (上海江鹿投資管理有限公司) and Shanghai Xinlu Investment Management Co., Ltd.
(上海鑫鹿投資管理有限公司) are held by Shanghai Youlu Investment Management Co., Ltd. (上海游鹿投資管理有限公
司), which in turn is controlled by Zhang Zhen (張真). As such, Shanghai Youlu Investment Management Co., Ltd.
(上海游鹿投資管理有限公司), Shanghai Songlu Investment Management Co., Ltd. (上海松鹿投資管理有限公司),
Shanghai Jianglu Investment Management Co., Ltd. (上海江鹿投資管理有限公司) and Shanghai Xinlu Investment
Management Co., Ltd. (上海鑫鹿投資管理有限公司) will be deemed to be interested in the Shares held by Unifront
Holding Limited (優孚控股有限公司) upon Listing. As such, Zhang Zhen (張真) will be deemed to be interested in the
Shares held by Unifront Holding Limited (優孚控股有限公司) upon Listing.
(6) Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) is a subsidiary of Timeway Holdings Limited
(中宇集團有限公司) which in turn is entirely owned by Sinolink Worldwide Holdings Limited (香港百仕達控股有限公
司) which is listed on the Hong Kong Stock Exchange (SEHK: 1168), of which Mr. Yaping Ou is interested in more than
one third of the voting shares. As such, Timeway Holdings Limited (中宇集團有限公司), Sinolink Worldwide Holdings
Limited (香港百仕達控股有限公司) and Mr. Yaping Ou will be deemed to be interested in the Shares held by Cnhooray
Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) upon Listing.
(7) Morgan Stanley Asia Securities Products LLC is wholly owned by Morgan Stanley Hong Kong Limited and the ultimate
parent company is Morgan Stanley, whose shares are listed on the New York Stock Exchange (NYSE: MS).
(8) CICC Securities (HK) Limited is wholly owned by CICC Jiazi Holdings Limited, which in turn is wholly owned by CICC
AGI, which in turn is wholly owned by CICC HK. CICC HK is a wholly owned subsidiary of China International Capital
Corporation Limited (SEHK: 3908).
(9) The general partner of CDH Avatar. L.P is CDH China HF Holdings Company Limited which is wholly owned by CDH
Wealth Management Company Limited, which is owned by CDH China Management Company Limited as to 50%. China
Diamond Holdings Company Limited holds 72.24% of CDH China Management Company Limited.
(10) Keywise ZA Investment is an investment of Keywise Greater China Opportunities Master Fund. The investment advisor
is Keywise Capital Management (HK) Limited which in turn owns 23% interest in Keywise ZA Investment. Other
investors own 77% interest in Keywise ZA Investment.
(11) Equine Forces Limited Partnership (“EFLP”) is an exempted limited partnership registered under the laws of the Cayman
Islands. The general partner of EFLP is Equine Forces Limited (“EFL”), an exempted limited liability company
incorporated in the Cayman Islands. Mr. Andrew Y. Yan has actual control over EFL, who will be deemed to be interested
in the Shares held by EFLP.
(12) SoftBank Group is a Japanese corporation listed on the Tokyo Stock Exchange (TYO: 9984).

— 337 —
OUR CORNERSTONE INVESTOR

THE CORNERSTONE PLACING

We have entered into a cornerstone investment agreement (the “Cornerstone Investment


Agreement”) with SoftBank Group Corp. (“SoftBank Group”), who has agreed to subscribe for
71,909,800 H Shares at the Offer Price. The total number of H Shares to be subscribed for by SoftBank
Group represents (i) approximately 36.08% of the Offer Shares, and approximately 4.99% of our total
issued share capital, upon completion of the Global Offering (assuming that the Over-allotment Option
is not exercised); and (ii) approximately 31.38% of the Offer Shares, and approximately 4.89% of our
total issued share capital, upon completion of the Global Offering (assuming that the Over-allotment
Option is exercised in full). The total subscription price payable by Softbank Group is (i)
HK$4,293.02 million based on an Offer Price of HK$59.70 (being the maximum price of the Offer
Price range stated in this prospectus); and (ii) HK$3,861.56 million based on an Offer Price of
HK$53.70 (being the minimum price of the Offer Price range stated in this prospectus). Under the
Cornerstone Investment Agreement, SoftBank Group may elect to acquire the Shares through one of
its wholly-owned subsidiaries or affiliates, including SoftBank Vision Fund.

SoftBank Group is a Japanese corporation listed on the Tokyo Stock Exchange, with operations
in broadband, mobile and fixed-line telecommunications, e-commerce, Internet, technology services,
media and marketing, and other businesses. SoftBank Vision Fund, established in Jersey as a limited
partnership, is an investment fund that focuses on investments in the global technology industry. Its
general partner is SVF GP (Jersey) Limited, a company incorporated in Jersey and a wholly-owned
subsidiary of SoftBank Group.

SoftBank Group is independent from our Company, our connected persons and their respective
associates. SoftBank Group will not subscribe for any H Shares under the Global Offering other than
pursuant to the Cornerstone Investment Agreement. Immediately following the completion of the
Global Offering, SoftBank Group will not have any board representation in our Company, nor will it
become a Substantial Shareholder of our Company. The shareholdings of SoftBank Group will be
counted towards the public float of our Shares.

The cornerstone placing forms part of the International Placing. The H Shares to be purchased
by SoftBank Group will not be affected by any reallocation of the H Shares between the International
Placing and the Hong Kong Public Offering in the event of over-subscription under the Hong Kong
Public Offering as described in the section “Structure of the Global Offering — The Hong Kong Public
Offering”. Details of the allocations to SoftBank Group will be disclosed in the announcement of
results of allocations in the Hong Kong Public Offering to be published on Wednesday, September 27,
2017.

RESTRICTIONS ON DISPOSALS BY SOFTBANK GROUP

SoftBank Group has agreed that, without the prior written consent of our Company and the
Underwriters’ Representatives (as defined in the Cornerstone Investment Agreement), it will not,
whether directly or indirectly, at any time during the period of six months following the Listing Date,
dispose of (as defined in the Cornerstone Investment Agreement) any of the H Shares subscribed for

— 338 —
OUR CORNERSTONE INVESTOR

by it pursuant to the Cornerstone Investment Agreement, other than transfers to its wholly-owned
subsidiary or affiliate provided that such wholly-owned subsidiary or affiliate undertakes in writing
to, and SoftBank Group undertakes to procure that such wholly-owned subsidiary or affiliate will,
abide by the restrictions on disposals imposed on SoftBank Group.

CONDITIONS PRECEDENT

The subscription obligation of SoftBank Group is subject to, among other things, the following
conditions precedent:

(i) the Hong Kong Underwriting Agreement and the International Underwriting Agreement
being entered into and having become effective and unconditional (in accordance with their
respective original terms or as subsequently waived or varied by agreement of the parties
thereto) by no later than the time and date as specified in the Hong Kong Underwriting
Agreement and the International Underwriting Agreement;

(ii) neither the Hong Kong Underwriting Agreement nor the International Underwriting
Agreement having been terminated;

(iii) the Listing Committee having granted the approval for the listing of, and permission to deal
in, the H Shares (including the H Shares to be subscribed by SoftBank Group as well as
other applicable waivers and approvals) and that such waiver, approval or permission not
having been revoked;

(iv) no laws shall have been enacted or promulgated by any governmental authority which
prohibit the consummation of the transactions contemplated in the Hong Kong Public
Offering, the International Offering or the Cornerstone Investment Agreement, and there
shall be no orders or injunctions from a court of competent jurisdiction in effect precluding
or prohibiting consummation of such transaction; and

(v) the representations, warranties, undertakings and confirmations of SoftBank Group under
the Cornerstone Investment Agreement are and will be (as of the closing of the Cornerstone
Investment Agreement) accurate and true in all respects and not misleading and that there
is no material breach of the Cornerstone Investment Agreement.

— 339 —
RELATIONSHIP WITH CONNECTED PERSONS

We have entered into certain agreements with entities that will constitute our connected persons,
and such arrangements, upon the Listing, will constitute continuing connected transactions of our
Company under Chapter 14A of the Listing Rules.

A. SUMMARY OF OUR CONNECTED PERSONS

We have entered into certain transactions that will constitute continuing connected transactions
following the Listing with the following connected persons:

• Our Directors and Supervisors and certain associates of our Directors and Supervisors:
Under Rule 14A.07(1) and 14A.12 our Directors and Supervisors and their associates will
become our connected persons upon the Listing.

• Mr. Yaping Ou holds approximately 45.11% of Sinolink Worldwide. Sinolink Worldwide is


an associate of Mr. Yaping Ou under Rule 14A.12 of the Listing Rules and will become a
connected person of the Company under Rule 14A.07(4) of the Listing Rules.

• Ant Financial Group: Upon the Listing (assuming the Over-allotment Option is not
exercised), Ant Financial will hold 13.82% of the total issued share capital of our Company
and will be our substantial shareholder under the Listing Rules. Under Rule 14A.07(1),
14A.07(4) and 14A.12 of the Listing Rules, Ant Financial and its subsidiaries will become
our connected persons upon the Listing.

• Tencent Computer System and Tencent and their respective associates: Upon the Listing
(assuming the Over-allotment Option is not exercised), Tencent will control the exercise of
10.42% of the voting power of our Company through Tencent Computer System and will
be our substantial shareholder under the Listing Rules. Under Rules 14A.07(1) and 14A.12
of the Listing Rules, Tencent Computer System and Tencent and their respective associates
will become our connected persons upon the Listing.

• Ping An Group: Upon the Listing (assuming the Over-allotment Option is not exercised),
Ping An Insurance will hold 10.42% of the total issued share capital of our Company and
will be our substantial shareholder under the Listing Rules. Under Rules 14A.07(1) and
14A.12 of the Listing Rules, Ping An Insurance and its associates will become our
connected persons upon the Listing.

— 340 —
RELATIONSHIP WITH CONNECTED PERSONS

B. SUMMARY OF OUR CONTINUING CONNECTED TRANSACTIONS

Proposed annual cap of the year


ending December 31
Applicable
Transaction Listing Rules Waiver Sought 2017 2018 2019

(RMB in thousands)
FULLY-EXEMPT CONTINUING
CONNECTED TRANSACTIONS
Transactions with our Directors and
Supervisors and certain associates of
our Directors and Supervisors
Purchase of insurance products by our Rule 14A.76(1) N/A N/A N/A N/A
individual connected persons
Transactions with Tencent Computer
System and its associates
Provision of payment related service by Rule 14A.76(1) N/A N/A N/A N/A
associates of Tencent Computer
System to us
NON-EXEMPT CONTINUING
CONNECTED TRANSACTIONS
Transactions with Sinolink Worldwide
and its subsidiary
Provision of insurance products to Rule 14A.35, Announcement 40,000 80,000 120,000
Sinolink Worldwide and its Rule 14A.76(2) requirement
subsidiaries by us
Transactions with associates of Tencent
Provision of insurance products to Rule 14A.35, Announcement 10,164 5,040 N/A
associate of Tencent by us Rule 14A.76(2) requirement
Online platform cooperation agreement Rule 14A.35, Announcement 6,050 8,900 10,000
between associates of Tencent and us Rule 14A.76(2) requirement
Transactions with Ping An Group
Online information technology system Rule 14A.35, Announcement 15,112 20,000 N/A
support services agreement between Rule 14A.76(2) requirement
Ping An P&C and us
Provision of asset management services Rule 14A.35, Announcement 19,420 20,569 21,804
provided by Ping An Asset Rule 14A.52 requirement and
Management to us and Rule requirement on
14A.76(2) the duration for
the agreement

— 341 —
RELATIONSHIP WITH CONNECTED PERSONS

Proposed annual cap of the year


ending December 31
Applicable
Transaction Listing Rules Waiver Sought 2017 2018 2019

(RMB in thousands)
Cooperation agreement for the provision Rule 14A.35, Announcement 120,000 336,000 720,000
of auto co-insurance, between Ping An Rule 14A.52, requirement,
P&C and us Rule 14A.76(2) requirement on
and Rule the duration for
14A.105 the agreement
and shareholder
approval
requirement
Transactions with Ant Financial and its
associates
Reward points purchase agreement Rule 14A.35 Announcement 20,500 29,500 40,000
between associates of Ant Financial and Rule requirement
Group and us 14A.76(2)
Online platform cooperation agreement Rule 14A.35, Announcement 448,493 612,321 769,857
between Ant Financial and/or its Rule 14A.76(2) requirement and
associates and us and Rule shareholder
14A.105 approval
requirement
Provision of insurance products to Ant Rule 14A.35 Announcement 11,613 1,152 1,121
Financial and/or its associates by us and Rule requirement
14A.76(2)

C. FULLY-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Transactions with our Directors and Supervisors and Certain Associates of Our Directors and
Supervisors

Purchase of Insurance Products by Our Individual Connected Persons

Background

We provide a wide range of insurance products in the ordinary and usual course of our business
to the public. Certain of our Directors and Supervisors and their respective associates have purchased
insurance products from us. Each of these insurance products was individually entered into between
us and the Director or the Supervisors or their respective associates. None of them received any
preferential treatment in respect of their purchase of our insurance products. The premiums paid by
them are comparable to the premiums paid by our other customers who are independent third parties
of similar insurance products or to the prevailing market prices. It is expected that such transactions
will continue after Listing.

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RELATIONSHIP WITH CONNECTED PERSONS

Listing Rules Implications

In respect of the sale of insurance products by us to our Directors and Supervisors and their
respective associates, each of the applicable percentage ratios under the Listing Rules is, on an annual
basis, expected to be less than 0.1% and therefore falls within the de minimis threshold as stipulated
under Rule 14A.76(1) of the Listing Rules. Furthermore, the sale of these insurance products by us
to our Directors and Supervisors or their respective associates is on normal commercial terms in our
ordinary and usual course of business and such sale constitutes an acquisition by each such individual
connected person as consumer goods or services for their own private use, and therefore falls within
the exemption as stipulated under Rule 14A.97 of the Listing Rules. Accordingly, such transactions
are exempt from the reporting, annual review, announcement and independent shareholders’ approval
requirements under Chapter 14A of the Listing Rules.

We will comply with the reporting, annual review, announcement and/or independent
shareholders’ approval requirements in accordance with the Listing Rules if any of the percentage
ratios with respect of the insurance premiums paid by our any Directors or Supervisors or their
respective associates to our Company and our associates exceeds the de minimis threshold as
stipulated under Rule 14A.76(1) or otherwise falls outside the exemption provided under Rule 14A.97
of the Listing Rules.

Transactions with Tencent Computer System and its associates

Provision of payment related services by Tencent Computer System and its associates to us

Background

We have received certain payment related services from Tencent Computer System and its
associates. Purchasers of our insurance products conduct online transactions through payment
channels provided by Tencent Computer System and its associates. In return we pay a handling fee to
Tencent Computer System and its associates. These agreements were entered into between us and
Tencent Computer System and its associates at arm’s length and on normal commercial terms. The
handling fees paid by us are comparable to those paid by independent third parties to Tencent
Computer System and its associates for similar services or to the prevailing market prices. It is
expected that such transactions will continue after Listing.

The total handling fee paid to Tencent Computer System and its associates by us for each of the
three years ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were
nil, RMB507, RMB0.4 million and RMB0.3 million respectively.

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RELATIONSHIP WITH CONNECTED PERSONS

Listing Rules Implications

In respect of the provision of payment related service by Tencent Computer System and its
associates to us, each of the applicable percentage ratios under the Listing Rules is, on an annual basis,
expected to be less than 0.1% and therefore falls within the de minimis threshold as stipulated under
Rule 14A.76(1) of the Listing Rules. Accordingly, such transactions are exempt from the reporting,
annual review, announcement and independent shareholders’ approval requirements under Chapter
14A of the Listing Rules.

We will comply with the reporting, annual review, announcement and/or independent
shareholders’ approval requirements in accordance with the Listing Rules if any of the percentage
ratios with respect of the insurance premiums paid by our individual connected persons to our
Company and/or our associates exceeds the de minimis threshold as stipulated under Rule 14A.76(1).

NON-EXEMPT CONTINUING TRANSACTIONS

Transactions with Sinolink Worldwide and its subsidiaries

Provision of insurance products to Sinolink Worldwide and its subsidiaries by us

Background

We and Sinolink Worldwide, an entity owned by Mr. Ou Yaping as to 45.11%, entered into a
framework agreement for the provision of corporate insurance products by us to Sinolink Worldwide
(“Insurance Products Framework Agreement”).

The principal terms of the Insurance Products Framework Agreement are as follows:

• The Insurance Products Framework Agreement is for a term of 3 years commencing on the
Listing Date; and

• Relevant subsidiaries which are subsidiaries of Sinolink Worldwide will enter into separate
agreements with us which will set out the specific terms and conditions (including pricing)
according to normal commercial terms.

Reasons for the Transaction

We are one of only four companies with an online insurance license in China and it is in our
ordinary course of business to provide innovative corporate insurance products to all types of
organisations. The subsidiaries of Sinolink Worldwide conduct a variety of financial services that
require our insurance service and it is beneficial to us to expand our business into the financial
industry.

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RELATIONSHIP WITH CONNECTED PERSONS

Pricing Policies

The premiums received by us are comparable to those paid by independent third parties for
similar types of insurance products or to the prevailing market prices. For pricing of the premiums we
take into account the risk portfolio of the product itself, the product expense ratio and market
competitive prices. They are determined after careful examination and verification by our business
management committee of the department. Members of the committee conduct market analysis and
various other procedures to determine all aspects of the product including the pricing. These prices
must conform with the terms and regulations set by our Company and be approved by other relevant
departments such as the actuary department and the operations management centre. Premium rates of
these products are either approved by or filed with the CIRC. For example, in accordance with the
CIRC filing, for corporate accounts receivable credit insurance, the total premium we charge is based
on the following formula:

Insurance Coverage x Fixed Ratio x Floating Ratio

The Fixed Ratio ranges between 0.33% to 0.88% for products with different underlying assets
duration. The Floating Ratio is calculated based on a number of factors regarding the insured
corporate, including its corporate nature, risk management level and loss history, generally this would
be no less than 0.3.

Historical Amounts and Basis of Annual Caps

The total premium paid to us by subsidiaries of Sinolink Worldwide for each of the three years
ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were RMB1.0
million, RMB10,952, RMB2.8 million and RMB0.1 million respectively. For the years ending
December 31, 2017, 2018 and 2019, the relevant annual caps are expected to be RMB40.0 million,
RMB80.0 million and RMB120.0 million, respectively. When estimating the annual caps of the
premium, our Directors have taken into consideration the aforesaid historical amounts. In addition, the
big jump from the premium we received in 2016 to the premium we are expecting to received in 2017
is largely due to the increase in our business focus in the provision of credit guarantee insurance. We
are expecting significant increases in business volumes in late 2017 throughout 2018 and 2019
because: (1) From 2014 to 2016, we had provided Sinolink Worldwide and its subsidiaries primarily
with medical insurance and home contents insurance, the scale of which was relatively small.
However, as GWP of consumer finance ecosystem grew rapidly in 2015, we began to rapidly expand
our business focus in the provision of credit guarantee insurance in 2016; (2) Since 2016, we had
commenced cooperation with many business partners, including newly established subsidiaries of
Sinolink Worldwide that focus on financial leasing and commercial factoring services. From late 2016,
our Company had commenced relevant business negotiations with Sinolink Worldwide and its newly
established subsidiaries. By late 2016, we began providing credit guarantee insurance products to
Sinolink Worldwide and its subsidiaries; (3) As we stabilize our relationship with Sinolink Worldwide
and its subsidiaries in the provision of credit guarantee insurance, we are expecting significant
increase in the volume of business with them in the second half of 2017. We expect a growth rate of
100% and 50% for the years 2018 and 2019 respectively; (4) The consumer finance ecosystem will be
one of our major business focuses in the future. Sinolink Worldwide and its subsidiaries conduct a
variety of financial services which would require our insurance services. We are of the view that the

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RELATIONSHIP WITH CONNECTED PERSONS

projected growth rate is reasonable and is in line with the growth rate in the consumer finance-related
insurance market; (5) According to the Oliver Wyman Report, the consumer finance-related insurance
market in China is entirely addressable by Insuretech. The size of the market amounted to RMB6
billion in 2016 and is expected to grow to RMB50 billion in 2021, representing a CAGR of 52.8%.
This is in line with our projection for the future growth in our annual cap.

The table below sets out the summary of the historical amounts and annual caps for our provision
of insurance products to subsidiaries of Sinolink Worldwide by us:

Historical Amounts (RMB in thousands) Annual Caps (RMB in thousands)

For the
three
months
ended
For the years ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Provision of insurance
products to associates
of Sinolink
Worldwide by us . . . 1,040 11 2,754 102 40,000 80,000 120,000

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

Transactions with Associates of Tencent

Provision of insurance products to associates of Tencent by us

Background

We provide a wide range of insurance products in the ordinary and usual course of our business
to associates of Tencent. Specifically, associates of Tencent purchase accident injury insurance and
disease, death and disability insurance products from us for their employees. These insurance product
agreements were entered into between us and these entities at arm’s length. Associates of Tencent do
not receive any preferential treatment for purchasing these insurance products. The premiums paid to
us are comparable to those paid by independent third parties for similar types of insurance products
or to the prevailing market prices. It is expected that such transactions will continue after Listing.

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RELATIONSHIP WITH CONNECTED PERSONS

The principal terms of the agreements are set out as follows:

• The two agreements were entered into with two different entities that are associates of
Tencent on June 1, 2017 and August 21, 2017, respectively. Each agreement has a duration
of one year.

• The agreements provide different insurance plans for different levels of employees of these
entities. Each plan has its specific premium calculations, and injury and disability
assessment standards. We receive a premium from associates of Tencent according to the
premium schedule under each plan.

Reasons for the Transaction

We are one of only four companies with an online insurance license in China and it is in our
ordinary course of our business to provide different types of insurance products to a wide range of
clients. This includes corporate clients that purchase insurance plans for their employees. It is
beneficial to us to provide these insurance products to large corporations that have a large number of
employees, such as Tencent and its associates, which have a large number of employees.

Pricing Policies

The premiums received by us are comparable to those paid by independent third parties for
similar types of insurance products or to the prevailing market prices. For pricing of the premiums we
take into account the risk portfolio of the product itself, the product expense ratio and market
competitive prices. The total premium under the policies is also based on the cover period and the
number of employees covered during the period, and is adjusted in accordance with the employment
period of the insured company’s employees. They are determined after careful examination and
verification by our business management committee of the department. Members of the committee
conduct market analysis and various other procedures to determine all aspects of the product including
the pricing. These prices must conform with the terms and regulations set by our Company and be
approved by other relevant departments such as the actuary department and the operations
management centre. Premium rates of these products are either approved by or filed with the CIRC.

Historical Amounts and Basis of Annual Caps

The total premiums for the relevant transactions paid to us by associates of Tencent for each of
the three years ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017
were nil, RMB 3.8 million and RMB 6.9 million and RMB 0.08 million respectively. For the years
ending December 31, 2017 and 2018, the relevant annual caps are expected to be RMB10.2 million,
RMB5.0 million, respectively. When estimating the annual caps of the total premiums that we expect
to receive, our Directors have taken into consideration the aforesaid historical amounts, and also the
expected demand from associates of Tencent on behalf of their employees. As the latter of the two
agreements will expire by August 21, 2018, the annual cap estimated for 2018 will only cover the
period from January 1 to August 21, 2018.

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RELATIONSHIP WITH CONNECTED PERSONS

The table below sets out the summary of the historical amounts and annual caps of the premium
to be paid to us:

Historical Amounts Annual Caps


(RMB in thousands) (RMB in thousands)

For the
three
months
ended
For the years March For the years
ended December 31 31 ended December 31

2014 2015 2016 2017 2017 2018 2019

Provision of insurance products


to associates of Tencent by us . . nil 3,770 (Note 1) 6,929 (Note 1) 79 10,164 5,040 (Note 2) N/A

Notes:

(1) The historical numbers are based on past transactions.


(2) This cap is for the period up to August 21, 2018, being the date on which the latter of the two agreements will expire.

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

Online platform cooperation agreement between associates of Tencent Computer System and us

Background

As a provider of online insurance products, we use online platforms operated by associates of


Tencent Computer System to sell various insurance products to end users of the online platforms in
our ordinary course of business by paying a technical service fee. These agreements were entered into
between us at arm’s length and it is expected that such transactions will continue after Listing.

— 348 —
RELATIONSHIP WITH CONNECTED PERSONS

The principal terms of the agreements are set out as follows:

• The two agreements were entered into with one of Tencent Computer System’s associate on
April 12, 2016 and August 1, 2017, with a duration of one year and two years respectively.
Both parties have agreed to extend the first agreement for a further one year. This can be
further renewed unless one party provides written notice to terminate before the expiration
of one year.

• The first agreement allows us to use online platform operated by Tencent Computer
System’s subsidiary to sell credit card safety insurance and the second agreement allows us
to sell auto co-insurance.

Reasons for the Transaction

We are the leading online-only Insuretech company in China and one of the only four companies
with an online insurance licence. It is necessary as part of our online business expansion to utilise
various online platforms to reach a wider customer base. The continuous cooperation with Tencent
Computer System and its subsidiaries will be beneficial to us in light of Tencent Computer System’s
dominant market position in its online platform in the PRC market.

Pricing Policies

The monthly technical service fees either depends on the volume of insurance products sold and
the amount of promotional services (such as website notification service and website display service)
these online platform provides. Under current arrangements: (i) for credit card safety insurance policy,
a fixed fee is payable for each policy transacted through the online platform, for example under
current arrangements, the fixed fee may be up to approximately 50% of the premium we receive from
each policy; (ii) for auto co-insurance, the fee is based on the number of promotions through and web
appearances on the online platform. The fees chargeable by Tencent Computer System and its
associates are comparable to fees chargeable by them to other independent third parties.

Historical Amounts and Basis of Annual Caps

The total technical service fees paid by us to the subsidiary of Tencent Computer System for each
of the three years ended December 31, 2014, 2015 and 2016 and the three months ended March 31,
2017 were nil, nil, RMB0.4 million and RMB0.4 million respectively. For the years ending December
31, 2017, 2018 and 2019, the relevant annual caps are expected to be RMB6.05 million, RMB8.90
million and RMB10 million, respectively. When estimating the annual caps of the fees, our Directors
have taken into consideration expected sales volume of our insurance and the amount promotional
services we will require from the subsidiary of Tencent Computer System. The historical figures
obtained for the years ended December 31, 2016 and for the three months ended March 31, 2017 only
contains the fees charged under the first agreement. This is because the second agreement was only
signed on August 1, 2017. We only expect to utilize the promotional services for three months by the
end of 2017. Therefore there is a jump in total technical service fees charged from the end of 2017
to the end of 2018 as we fully capitalize on the two agreements.

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RELATIONSHIP WITH CONNECTED PERSONS

The table below sets out the summary of the historical amounts and annual caps for the fees paid
by us to the subsidiary of Tencent Computer System:

Historical Amounts (RMB in thousands) Annual Caps (RMB in thousands)

For the
three
months
ended
For the years ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Online platform
cooperation agreement
between a subsidiary of
Tencent Computer
System and us . . . . . . . — — 352 356 6,050 8,900 10,000

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

Transactions with Ping An Group

Online information technology system support services agreement between Ping An P&C and us

Background

We have entered into a framework agreement for our provision of online information technology
system support services to Ping An P&C. Ping An P&C utilises our distribution networks to sell its
various insurance products. In return, Ping An P&C pays us a technical service fee in respect of these
services. The technical service fee is based on normal commercial terms. We expect to continue to
enter into agreements with Ping An P&C on similar terms after Listing.

The agreement was entered into on December 6, 2016 for a term of 1 year, automatically
renewable for another year. We provide information system and technical support service to Ping An
P&C. Ping An P&C pays us a monthly technical service fee for this service.

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RELATIONSHIP WITH CONNECTED PERSONS

Reasons for the Transaction

We are one of only four companies with an online insurance license in China and it is in our
interest to collaborate with fellow insurance providers whereby we share our comparative advantage
in relation to technology. It is beneficial to us to enter into such transactions in order for us to fully
utilize our technical advantage.

Pricing Policies

The technical service fee is charged as a percentage of the premium charged on the particular
insurance product sold. For different types of insurance products, the percentage of technical service
fees may vary. It is agreed by both parties after arm’s length negotiations and the technical service
fee rates charged by us to Ping An P&C are within the scope of technical service fees for comparable
services determined between us and our other ecosystem partners. Typically, the technical service fee
will not exceed 35% of the total premium received.

Historical Amounts and Basis of Annual Caps

As the agreement was only entered into at the end of 2016, there have not been any historical
amounts paid to us by Ping An P&C to us for the three years ended December 31 2014, 2015 and 2016.
However, for the three months ended March 31, 2017, we have achieved RMB8.8 million in technical
service fees. For the years ending December 31, 2017 and 2018, the relevant annual caps are expected
to be RMB15.1 million and RMB20.0 million, respectively. When estimating the annual caps of the
technical service fee, our Directors have taken into consideration expected demand from Ping An
P&C.

The table below sets out the summary of the historical amounts and annual caps for the provision
of insurance products to Ping An P&C by us:

Historical Amounts Annual Caps


(RMB in thousands) (RMB in thousands)

For the
three
months
For the years ended
ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Online information
technology system
support services
agreement between Ping
An P&C and us . . . . . . nil nil nil 8,756 15,112 20,000 (note) N/A

Note: This cap is for the period up to December 5, 2018, being the date on which the online information technology system
support services agreement between Ping An Group and us will expire after one year automatic renewal.

— 351 —
RELATIONSHIP WITH CONNECTED PERSONS

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

Provision of asset management services by Ping An Asset Management to us

Background

We have entered into various asset management agreements with Ping An Asset Management, a
subsidiary of Ping An Group, one of which was entered into in January 13, 2014 and two others that
were entered into on April 8 and June 17, 2016, together with supplemental agreements entered into
on September 6, 2017 for all agreements, pursuant to which Ping An Asset Management agreed to
provide asset management services to us. We may enter into further asset management agreements
with Ping An Asset Management from time to time and the abovementioned transactions are expected
to continue following the Listing.

The principal terms of the agreements are set out as follows:

• Pursuant to these agreements the annual management fees chargeable by Ping An Asset
Management (inclusive of investment management fees and custodian fees) are less than
0.5% of the total value of our assets that we engage them to manage.

• The agreements have a term of 8 years, renewable for an additional 8 years, and it can be
renewed without a limit on the number of times unless terminated by either party within 30
business days written notice before the term expires.

Reasons for the Transaction

We have received asset management services from Ping An Asset Management since 2014. Ping
An Asset Management provides a range of insurance, asset management, annuities and banking
services. The asset management services provided by Ping An Asset Management are highly reputable
in the market and the continuous use of this service will be beneficial to us in light of Ping An Asset
Management’s experience in particular in long-term investments.

Pricing Policies

The pricing of the asset management services is determined at a market rate or as agreed by both
parties after arm’s length negotiations having regard to the amount of asset management services
required by us and the prices for comparable services charged by other asset management service
providers. We will only enter into these transactions when the management fees charged by Ping An
Group are in line with or lower than the rates offered by other competent and independent third party

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RELATIONSHIP WITH CONNECTED PERSONS

service providers and the agreement is in the best interests of our Shareholders as a whole. Under
current arrangements, the annual management fees chargeable by Ping An Asset Management
(inclusive of investment management fees and custodian fees) are less than 0.5% of the total value of
our assets that we engage them to manage, which are comparable to or less than the fees charged by
independent third parties for similar asset management services.

Historical Amounts and Basis of Annual Caps

The total management fees charged by Ping An Asset Management for each of the three years
ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were RMB1.5
million, RMB13.3 million and RMB17.8 million and RMB4.6 million, respectively. For the years
ending December 31, 2017, 2018 and 2019, the relevant annual caps are expected to be RMB19.4
million, RMB20.6 million and RMB21.8 million, respectively. When estimating the annual caps of the
managements fees, our Directors have taken into consideration the aforesaid historical amounts, and
also among other things, an estimate of the amount of asset management services expected to be
required by us for the relevant years.

Pursuant to Rule 14A.52 of the Listing Rules, the term of an agreement must not exceed three
years except in special circumstances where the nature of the transaction requires a longer period.
Given the nature of asset management services, we believe that such agreements are often required to
have a longer term in order to make long-term investments and it is normal business practice for asset
management agreements of this nature to be of longer durations. Our Directors (including our
independent non-executive Directors) are of the view that these asset management agreements
(including their duration, which is in accordance with normal business practice and will facilitate long
term investment using the assets of our Company), the transactions contemplated therein, as well as
the proposed annual caps set forth below, are on normal commercial terms, fair and reasonable and
are in the interests of our Company and our Shareholders as a whole.

The table below sets out the summary of the historical amounts and annual caps of asset
management services provided by Ping An Asset Management to us:

Historical Amounts (RMB in thousands) Annual Caps (RMB in thousands)

For the
three
months
ended
For the years ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Provision of asset
management services
provided by Ping An
Asset Management to us. 1,534 13,251 17,762 4,606 19,420 20,569 21,804

— 353 —
RELATIONSHIP WITH CONNECTED PERSONS

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

Cooperation agreement for the provision of auto co-insurance, between Ping An P&C and us

Background

On January 25, 2015, we entered into a co-insurance agreement with Ping An P&C, a subsidiary
of Ping An Insurance, to provide auto co-insurance to the public. The agreement was entered into on
an arm’s length basis and is expected that such transactions will continue after Listing.

The principal terms are as follows:

• The agreement is for a term of five years commencing on January 25, 2015. Since the
agreement was entered into in 2015, two years have elapsed and the agreement will expire
on January 25, 2020;

• We and Ping An P&C share the premiums and claim payments in 30% and 70% proportions,
respectively;

• Ping An P&C is primarily responsible for operating the duties under the agreement and
payments will be made to Ping An P&C which will then be settled with us.

Reasons for the Transaction

Ping An Group is one of the largest insurance providers in the PRC. Property and casualty
insurance has been the foundation of its business with steady growth since its inception. The
co-insurance cooperation agreement allows us not only to share the risk of claims with Ping An Group
but also reach a wider base of customers.

Pricing Policies

The auto insurance premiums are heavily regulated in the PRC and the premium charged under
the cooperation agreement is determined at a market rate and approved by the CIRC. They are
determined after careful examination and verification by the business management committee of the
department. Members of the committee conduct market analysis and various other procedures to
determine all aspects of the product including the pricing. These prices must conform with the terms
and regulations set by our Company and be approved by other relevant departments such as the actuary

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RELATIONSHIP WITH CONNECTED PERSONS

department and the operations management centre. The premium and claim payment sharing ratio
between us and Ping An Group is agreed by both parties after arm’s length negotiations having regard
to the fact that Ping An Group will be responsible for the daily operations of the agreement including
receiving reports of claims, investigating the claims and maintaining customer records. Under the
current agreement, the ratio in which premiums and claims are shared is 70% and 30% between Ping
An P&C and us, respectively.

Historical Amounts and Basis of Annual Caps

The total premiums we received from Ping An P&C for each of the three years ended December
31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were nil, RMB17,019, RMB3.5
million and RMB1.3 million respectively. For the years ending December 31, 2017, 2018 and 2019,
the relevant annual caps are expected to be RMB120.0 million, RMB336.0 million and RMB720.0
million, respectively. When estimating the annual caps of the premium to be received from Ping An
P&C, our Directors have taken into consideration the aforesaid historical amounts. Since the second
half of 2017, there has been significant increases in business volumes and the Company believes that
this will continue throughout the remaining months of 2017. The large increase in premium from 2016
to 2017 was due to our increased collaboration efforts with Ping An P&C as 2016 only marked the
beginning of our collaboration with them in this area of business. At the time, we had only obtained
approval from the CIRC to adopt the China Insurance Association Model Comprehensive Commercial
Vehicle Insurance Policy in six commercial auto insurance experimental zones including Heilongjiang,
Shandong, Guangxi, Chongqing Shanxi and Qingdao. We are expecting significant increases in
business volumes in late 2017 throughout 2018 and 2019 because: (1) By 2017, we have stabilized our
business relationship and by March 2017, we have obtained further approval from the CIRC to provide
auto insurance products in an additional 12 regions. As a result, our auto insurance service coverage
is spread over a total of 18 regions within the PRC, accounting for more than 66% of China’s auto
insurance market. These regions include first-tier cities like Beijing, Shanghai and Shenzhen,
representing the majority of the auto insurance market in the PRC, allowing us to gain further
exposure to the market; (2) In addition, we are gradually cooperating with more partners, such as Didi
Chuxing, Xiaomi and WeChat, to reach out to more automobile consumers. With our targeted
marketing practices and streamlined purchasing and settlement process, compared with traditional
auto insurance, we have a considerable comparative advantage as one of the only four Online
insurance companies in the PRC, in connecting online customer base with offline insurance settlement
providers and offering more convenient customer services, which enable us to tap into the large auto
insurance markets; (3) We also plan to extend the coverage to the full automotive industry. According
to the Oliver Wyman Report, the size of the auto related Insuretech market amounted to RMB124
billion in 2016, and is expected to grow to RMB412 billion in 2021, representing a CAGR of 27.1%.
The percentage of the overall auto insurance market that is addressable by Insuretech is expected to
increase from 18% in 2016 to 35% in 2020; (4) Finally, we plan to take full advantage of regulatory
reform in relation to auto insurance premiums in the PRC to increase our coverage of auto insurance
business, leveraging on our technological capability and asset-light business model. As a result of the
abovementioned factors, we estimate a significant increase in our annual cap for the three years ending
December 31, 2019.

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RELATIONSHIP WITH CONNECTED PERSONS

Pursuant to Rule 14A.52 of the Listing Rules, the term of an agreement must not exceed three
years except in special circumstances where the nature of the transaction requires a longer period. In
this case, the agreement was entered into in 2015, two years have elapsed and the remaining three
years would mean that the agreement will expire on January 24, 2020, just one month after the three
year requirement.

The table below sets out the summary of the historical amounts and annual caps of the premiums
paid by Ping An P&C to us:

Historical Amounts (RMB in thousands) Annual Caps (RMB in thousands)

For three
months
ended
For the years ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Cooperation agreement
for the provision of auto
co-insurance, between
Ping An P&C and us . . . — 17 3,476 1,293 120,000 336,000 720,000

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 5%. Therefore, upon the Listing, and in the
absence of the grant of a waiver by the Hong Kong Stock Exchange, these transactions are subject to
the announcement and independent Shareholders’ approval requirements under Chapter 14A of the
Listing Rules.

Transaction with Ant Financial Group and its Associates

Reward points purchase agreement between associates of Ant Financial Group and us

Background

We have entered into an agreement with associates Ant Financial Group for the purchase of
reward points, “Jifenbao” for the use of our marketing activities. The agreement is entered into in our
ordinary course of business and is entered into on normal commercial terms. It is expected that such
transaction will continue after Listing.

The agreement was entered into on October 31, 2016 for a term of three years pursuant to
supplemental agreement entered into on September 6, 2017. We purchase “Jifenbao” from an associate
of Ant Financial Group and either distribute it to target customers of our insurance products directly
or instruct Alipay to distribute the reward points. These reward points can be used on Tmall and
Taobao as discounts when those target customers purchase products using Alipay.

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RELATIONSHIP WITH CONNECTED PERSONS

Reasons for the Transaction

As part of our promotion program to award purchasers of our insurance products, we have
entered into this agreement with associates of Ant Financial to leverage off Alipay’s customer reach
and in order to differentiate our product from others that are also sold through the platforms. It is
beneficial to us to enter into such transactions as “Jifenbao” is a popular reward points system in the
PRC and will be able to help us attract more customers.

Pricing Policies

We are charged the face value of the “Jifenbao” and the relevant handling fee. Under current
arrangements, the fee payable by us for every 100 units of “Jifenbao” (the units under the Jifenbao
reward points system) is RMB1.10, which represents the market value that Ant Financial charges an
independent third party for similar quantities of purchases. The fee includes platform services fees
related to the use of the Jifenbao platform. The relevant handling fee chargeable by Ant Financial is
comparable to that as charged from an independent third party.

Historical Amounts and Basis of Annual Caps

The total fees paid by us to Ant Financial Group and/or its associates for each of the three years
ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were nil, nil,
RMB3.0 million and RMB2.5 million respectively. For the years ending December 31, 2017, 2018 and
2019, the relevant annual caps are expected to be RMB20.5 million, RMB29.5 million and RMB40
million, respectively. When estimating the annual caps of the fees, our Directors have taken into
consideration expected sales volume of our insurance on the relevant platforms that utilize Alipay. Our
health insurance business has been expanding since the second half of 2016 and is expected to
continue to grow from 2017 to 2019. At the same token, our health insurance business in the Alipay
platform has expanded since 2016 and is expected to continue to grow. Moreover we also expect our
business through the Tmall platform will continue to expand. As a result of these factors, we expect
to purchase more “Jifenbao” in order to facilitate the marketing activities we conduct in the Alipay
platform or our self-operated platforms.

The table below sets out the summary of the historical amounts and annual caps for the fees paid
by us to associates of Ant Financial Group:

Historical Amounts (RMB) Annual Caps (RMB)

For the
three
months
ended For the years ended
For the years ended December 31 March 31 December 31

2014 2015 2016 2017 2017 2018 2019

Reward points purchase


agreement between Ant
Financial Group and/or
its associates and us . . . — — 2,967 2,468 20,500 29,500 40,000

— 357 —
RELATIONSHIP WITH CONNECTED PERSONS

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

Online platform cooperation agreement between Ant Financial and/or its associates and us

Background

We and Ant Financial have entered into an online platform cooperation framework agreement for
the provision of insurance products to various parties (“Online Platform Cooperation Framework
Agreement”). As a provider of online insurance products we use online platforms operated by Ant
Financial and/or its associates to sell various insurance products to end users of their online platforms
in our ordinary course of business.

The principal terms of the Online Platform Cooperation Framework Agreement are as follows:

• the Online Platform Cooperation Framework Agreement is for a term of 3 years


commencing on the Listing Date; and

• relevant subsidiaries of Ant Financial Group will enter into separate agreements with us
which will set out the specific terms and conditions (including pricing) according to normal
commercial terms provided in the Online Platform Cooperation Framework Agreement.

Reasons for the Transaction

We are one of only four companies with an online insurance licence in China. It is necessary as
part of our online business expansion to utilise various online platforms to reach a wider customer
base. The cooperation with Ant Financial Group will be beneficial to us in light of Ant Financial
Group’s dominant market position in online platforms in the PRC market.

Pricing Policies

The platform service fees paid to Ant Financial and/or its associates by us are determined based
on arm’s length negotiations between us and Ant Financial and/or its associates. They are determined
according to the following principles:

• if there exist comparable market rates paid by independent third parties, the platform
service fees shall be based on such prevailing market rates.

— 358 —
RELATIONSHIP WITH CONNECTED PERSONS

• if there exist no comparable rates, the platform service fees shall be based on arm’s length
negotiations.

• if there exist no comparable rates and there are difficulties with regards to arm’s length
negotiations, the platform service fees can be based on similar transactions’ market rates.

Currently the platform service fees charged by Ant Financial and its associates are comparable
to fees charged by Ant Financial to other independent third parties. The fees are calculated with
reference to the total premium we receive from the insurance products sold through such platforms.
The calculation is either based on (a) a fixed rate of the total premium; or (b) a formula based on the
actual settlement claim in relation to the insurance products. For example, under current arrangements,
the technical services fee in relation to shipping return insurance (which accounts for the largest
proportion of technical fees paid to Ant Financial and its associates, representing approximately
46.28% of the technical services fees paid to Ant Financial and its associates for the year ended 31
December 2016) is based on the following formula: Total Premium x (Settlement Limit — Actual
Settlement Rate) x Fixed Rate.

The Actual Settlement Rate is calculated based on, and is adjusted from time to time in
accordance with, the actual claim settlements of the insurance product. The Settlement Limit is based
on the claim settlement limit set for each policy.

The fixed rates used in both calculation methods are determined based on a number of factors
specific to each insurance product, including the product’s risk management level, the promotion
offered by the online platform, prevailing market prices for similar insurance products and the scale
of the product business. The technical services fees are typically between 5% to 35% of the total
premium received.

We consider Ant Financial an important ecosystem partner and the customer reach offered by Ant
Financial is incomparable to other online platform service providers. Nevertheless, before entering
into any agreement under the Online Platform Cooperation Framework Agreement, we will assess our
needs we will only enter into these transactions when the agreement is in the best interests of our
Shareholders as a whole.

Historical Amounts and Basis of Annual Caps

The total platform service fees paid by us to Ant Financial and/or its associates for each of the
three years ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were
RMB22.8 million, RMB304.7 million and RMB437.7 million and RMB94.3 million, respectively. For
the years ending December 31, 2017, 2018 and 2019, the relevant annual caps are expected to be
RMB448.5 million, RMB612.3 million and RMB769.9 million, respectively. When estimating the
annual caps of the online platform fees to be paid to Ant Financial and/or its associates by us, our
Directors have taken into consideration the aforesaid historical amounts, and also, among other things,
an estimate of expected market demand.

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RELATIONSHIP WITH CONNECTED PERSONS

The table below sets out the summary of the historical amounts and annual caps of the online
platform fees to be paid to Ant Financial and/or its associates by us:

Historical Amounts (RMB in thousands) Annual Caps (RMB in thousands)

For the
months
ended
For the years ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Online platform
cooperation agreement
between Ant Financial
and/or its associates and
us . . . . . . . . . . . . . . 22,775 304,716 437,735 94,332 448,493 612,321 769,857

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 5%. Therefore, upon the Listing, and in the
absence of the grant of a waiver by the Hong Kong Stock Exchange, these transactions are subject to
the announcement and independent Shareholders’ approval requirements under Chapter 14A of the
Listing Rules.

Provision of insurance products to Ant Financial and/or its associated by us

Background

We and Ant Financial Group have entered into a provision of insurance products framework
agreement (“Provision of Insurance Products Framework Agreement”). We, in the ordinary and
usual course of our business, sell various insurance products to Ant Financial and/or its associates
including trust plan guarantee insurance, group health insurance and various other forms of insurance
products. We expect to continue to enter into agreements with Ant Financial and/or its associates on
similar terms following the Listing.

The principal terms of the Provision of Insurance Products Framework Agreement are as follows:

• the Provision of Insurance Products Framework Agreement is for a term of 3 years


commencing on the Listing Date; and

• relevant subsidiaries of Ant Financial Group will enter into separate agreements with us
which will set out the specific terms and conditions (including pricing) according to normal
commercial terms provided in the Provision of Insurance Products Framework Agreement.

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RELATIONSHIP WITH CONNECTED PERSONS

Reasons for the Transaction

Ant Financial Group provides a wide range of financing services to the public. We cater for their
various services through the provision of customised insurance products. In light of Ant Financial
Group’s market size in the financing industry, this cooperation will contribute to our revenue and be
beneficial to us.

Pricing Policies

The premiums paid by Ant Financial and/or its associates to us are determined based on arm’s
length negotiations between us. They are determined according to the following principles:

• if there exist comparable market rates paid by independent third parties, the premiums shall
be based on such prevailing market rates.

• if there exist no comparable rates, the premiums shall be based on arm’s length
negotiations.

• if there exist no comparable rates and there are difficulties with regard to arm’s length
negotiations, the premiums can be based on similar transactions’ market rates.

Currently the premiums charged by us are comparable to market rates charged to independent
third parties. Our pricing of the premiums is based on factors such as potential claim payments,
product expense ratio, back-office service volume required, product scale and competitiveness against
other insurance products offered on the online platforms of Ant Financial and its associates. The total
premium under the policies is also based on other factors specific to the category of policy provided.
For example, for health insurance products under current arrangements, the calculation of the total
premium also takes into account the cover period and the number of employees covered during the
period, and is adjusted in accordance with the employment period of the insured company’s
employees. Premium rates of these products are either approved by or filed with the CIRC. They are
determined after careful examination and verification by our the business management committee of
the department. Members of the committee conduct market analysis and various other procedures to
determine all aspects of the product including the pricing. These prices must conform with the terms
and regulations set by our Company and be approved by other relevant departments such as the actuary
department and the operations management centre. Once we propose the premiums that we will charge,
we will then undergo a tender process, whereby Ant Financial and its associates compare our premium
charges against those other independent third parties.

— 361 —
RELATIONSHIP WITH CONNECTED PERSONS

Historical Amounts and Basis of Annual Caps

The total premiums paid to us by Ant Financial and/or its associates for each of the three years
ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017 were RMB28.0
million, RMB80.3 million, RMB85.2 million and RMB3.8 million respectively. For the years ending
December 31, 2017, 2018 and 2019, the relevant annual caps are expected to be RMB11.6 million ,
RMB1.2 million and RMB1.1 million, respectively. When estimating the annual caps of the premiums
to be paid by Ant Financial Group to us, our Directors have taken into consideration the aforesaid
historical amounts. The expected decrease in the premiums we receive is largely due to the shift in
business focus of Ant Financial and/or its associates away from some of the various insurance products
we provide to them. Instead, we will focus on providing them with health insurance products going
forward.

The table below sets out the summary of the historical amounts and annual caps of the premiums
to be paid by Ant Financial Group to us:

Historical Amounts (RMB in thousands) Annual Caps (RMB in thousands)

For the
three
months
ended
For the years ended December 31 March 31 For the years ended December 31

2014 2015 2016 2017 2017 2018 2019

Provision of insurance
products to Ant
Financial Group and/or
its associates by us . . . . 28,049 80,290 85,234 3,844 11,613 1,152 1,121

Listing Rules Implications

These transactions are conducted in the ordinary and usual course of business on normal
commercial terms, and our Directors currently expect that each of the applicable percentage ratios
under Chapter 14A of the Listing Rules will exceed 0.1% but be lower than 5%. Pursuant to Rule
14A.76(2) of the Listing Rules, these transactions will be exempt from the independent shareholders’
approval requirement under Chapter 14A of the Listing Rules, but will be subject to reporting, annual
review and announcement requirements.

— 362 —
RELATIONSHIP WITH CONNECTED PERSONS

D. WAIVER APPLICATIONS FOR NON-EXEMPT CONTINUING CONNECTED


TRANSACTIONS

Our non-exempt continuing connected transactions and the corresponding waivers applied for,
are summarised in the table below:

Non-exempt transactions Waivers applied for

1. Provision of insurance products to Sinolink Announcement requirement


Worldwide and its subsidiaries by us . . . . . . . . . . . .
2. Provision of insurance products to associates of Announcement Requirement
Tencent by us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Online platform cooperation agreement between a Announcement Requirement
subsidiary of Tencent Computer System and us . . . . .
4. Online information technology system support Announcement requirement
services agreement between Ping An P&C and us . . .
5. Provision of asset management services provided by Announcement requirement and
Ping An Asset Management to us . . . . . . . . . . . . . . . . requirement on the period for the
agreement
6. Cooperation agreement for the provision of auto Announcement requirement,
co-insurance, between Ping An P&C and us . . . . . . . . requirement on the period for the
agreement and shareholder approval
requirement
7. Reward points purchase agreement between Announcement requirement
associates of Ant Financial Group and us . . . . . . . . .
8. Online platform cooperation agreement between Ant Announcement requirement and
Financial and/or its associates and us . . . . . . . . . . . . shareholder approval requirement
9. Provision of insurance products to Ant Financial Announcement requirement
and/or its associates by us . . . . . . . . . . . . . . . . . . . .

Each of the above non-exempt continuing connected transactions described under the subsection
“Non-Exempt Continuing Connected Transactions” are expected to continue on a recurring basis after
the Listing and have been entered into prior to the Listing Date. They have been fully disclosed in the
prospectus and potential investors will participate in the Global Offering on the basis of such
disclosure, hence our Directors consider that strict compliance with the announcement and/or the
independent shareholders’ approval requirements would be impractical and unduly burdensome, and
would impose unnecessary administrative costs upon us.

— 363 —
RELATIONSHIP WITH CONNECTED PERSONS

Accordingly, our Company has applied for, and the Hong Kong Stock Exchange has granted to
our Company, a waiver from strict compliance with the announcement and the approval of independent
shareholders requirements under Rule 14A.105 of the Listing Rules in respect of each of the above
non-exempt continuing connected transactions. The waiver granted by the Hong Kong Stock Exchange
for the above non-exempt continuing connected transactions will expire on 31 December 2019. Upon
expiry of the waiver, such non-exempt continuing connected transactions will be subject to the then
applicable Listing Rules.

In terms of the duration of the agreement for (i) each of the asset management agreements with
Ping An Asset Management (each with a term of eight years ending on January 12, 2022, April 7, 2024
and June 16, 2024); and (ii) the cooperation agreement for the provision of auto co-insurance entered
into between us and Ping An P&C entered into on January 25, 2015 for five years, both of which have
terms longer than three years. For (i), it is normal business practice for agreements of this nature to
be of more than three year duration and we are, in any event, entitled to terminate the agreements upon
written notice before the terms expire. For (ii), the agreement expires within three years of the Listing,
on January 24, 2020. It would be in the interest of the Company and the Shareholders as a whole to
maintain its contractual obligations with Ping An P&C for the entire duration. Accordingly our
Company has also applied for, and the Stock Exchange has granted to our Company, a waiver from
strict compliance with the three year requirement for continuing connected transaction under Rule
14A.52 of the Listing Rules.

E. CONFIRMATION FROM OUR DIRECTORS

Our Directors (including our independent non-executive Directors) are of the view that (i) the
non-exempt continuing connected transactions set out above have been and will be entered into during
our ordinary and usual course of business on normal commercial terms, and are fair and reasonable
and in the interests of the Company and the Shareholders as a whole; (ii) the proposed annual caps
of such non-exempt continuing connected transactions and duration are fair and reasonable and in the
interests of our Company and our Shareholders as a whole; (iii) in respect of the duration of each of
the asset management agreements with Ping An Asset Management (each with a term of eight years
ending on January 12, 2022, April 7, 2024 and June 16, 2024), it is normal business practice for
agreements of this nature to be of more than three year duration and we are, in any event, entitled to
terminate the agreements upon written notice before the terms expire; and (iv) in respect of the
duration of the cooperation agreement for the provision of auto co-insurance, the agreement expires
within three years of the Listing, on January 24, 2020. It would be in the interest of the Company and
the Shareholders as a whole to maintain its contractual obligations with Ping An P&C for the entire
duration.

— 364 —
RELATIONSHIP WITH CONNECTED PERSONS

F. CONFIRMATION FROM THE JOINT SPONSORS

The Joint Sponsors are of the view that (i) the non-exempt continuing connected transactions set
out above have been and will be entered into during our ordinary and usual course of business on
normal commercial terms, and are fair and reasonable and in the interest of the Company and the
Shareholders as a whole; (ii) the proposed annual caps of such non-exempt continuing connected
transactions and duration are fair and reasonable and in the interests of our Company and our
Shareholders as a whole; (iii) in respect of the duration of each of the asset management agreements
with Ping An Asset Management (each with a term of eight years ending on January 12, 2022, April
7, 2024 and June 16, 2024), it is normal business practice for agreements of this nature to be of more
than three year duration and we are, in any event, entitled to terminate the agreements upon written
notice before the terms expire; and (iv) in respect of the duration of the cooperation agreement for the
provision of auto co-insurance, the agreement expires within three years of the Listing, on January 24,
2020. It would be in the interest of the Company and the Shareholders as a whole to maintain its
contractual obligations with Ping An P&C for the entire duration.

— 365 —
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

In preparation of the Global Offering, the Company has sought the following waivers from strict
compliance with the relevant provisions of the Listing Rules:

1. Waiver in Relation to Non-Exempt Continuing Connected Transactions

Each of the non-exempt continuing connected transactions described under the subsection
“Non-Exempt Continuing Connected Transactions” are expected to continue on a recurring basis after
the Listing and have been entered into prior to the Listing Date. They have been fully disclosed in the
prospectus and potential investors will participate in the Global Offering on the basis of such
disclosure, hence our Directors consider that strict compliance with the announcement and/or the
independent shareholders’ approval requirements would be impractical and unduly burdensome, and
would impose unnecessary administrative costs upon us.

Accordingly, our Company has applied for, and the Hong Kong Stock Exchange has granted to
our Company, a waiver from strict compliance with the announcement and the approval of independent
shareholders requirements (as applicable) under Rule 14A.105 of the Listing Rules in respect of each
of the above non-exempt continuing connected transactions. The waiver granted by the Hong Kong
Stock Exchange for the above non-exempt continuing connected transactions will expire on 31
December 2019. Upon expiry of the waiver, such non-exempt continuing connected transactions will
be subject to the then applicable Listing Rules.

In terms of the duration of the agreement for (i) each of the asset management agreements with
Ping An Asset Management (each with a term of eight years ending on January 12, 2022, April 7, 2024
and June 16, 2024); and (ii) the cooperation agreement for the provision of auto co-insurance entered
into between us and Ping An P&C, both of which have terms longer than three years: For (i), it is
normal business practice for agreements of this nature to be of more than three year duration and we
are, in any event, entitled to terminate the agreements upon written notice before the terms expire. For
(ii), the agreement expires within three years of the Listing, on January 24, 2020. It would be in the
interest of the Company and the Shareholders as a whole to maintain its contractual obligations with
Ping An P&C for the entire duration.

Accordingly our Company has also applied for, and the Stock Exchange has granted to our
Company, a waiver from strict compliance with the three year requirement for continuing connected
transactions under Rule 14A.52 of the Listing Rules.

For further details of such continuing connected transactions and the waivers, please see
“Relationship with Connected Persons — Waiver Applications for Non-exempt Continuing Connected
Transactions”.

2. Waiver in Relation to Management Presence in Hong Kong

Pursuant to Rule 8.12 and Rule 19A.15 of the Listing Rules, we must have a sufficient
management presence in Hong Kong. This normally means that at least two of our executive Directors
must be ordinarily resident in Hong Kong. Since most of the business operations of our Group are
managed and conducted outside of Hong Kong, and while Mr. Ou Yaping, an executive Director of the
Company, is a resident of Hong Kong, Mr. Jin Chen, an executive Director of the Company, is not

— 366 —
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

a resident of Hong Kong. As such, We do not have, and for the foreseeable future will not have,
sufficient management presence in Hong Kong for the purpose of satisfying the requirement under
Rule 8.12 and Rule 19A.15 of the Listing Rules. Accordingly, we have applied for, and the Hong Kong
Stock Exchange has granted, a waiver from strict compliance with the requirements under Rule 8.12
and Rule 19A.15 of the Listing Rules subject to the following conditions:

(a) we have appointed Mr. Jin Chen and Ms. Ella Wai Yee Wong as our authorised
representatives for the purposes of Rule 3.05 of the Listing Rules to serve as our principal
channel of communication with the Hong Kong Stock Exchange. We have provided the
Hong Kong Stock Exchange with their contact details, and they can be readily contactable
in Hong Kong to deal promptly with enquiries from the Hong Kong Stock Exchange, and
will also be available to meet with the Hong Kong Stock Exchange to discuss any matters
on short notice. As and when the Hong Kong Stock Exchange wishes to contact our
Directors on any matters, each of our authorised representatives will have means to contact
all of our Directors promptly at all times. We will implement measures such that (i) each
Director must provide his or her mobile phone number, office phone number, facsimile
number and email address to our authorised representatives and the Hong Kong Stock
Exchange; and (ii) in the event that a Director expects to travel or otherwise be out of
office, he or she will provide the phone number of the place of his or her accommodation
to our authorised representatives.

(b) we have provided the Hong Kong Stock Exchange with the contact details of each Director
to facilitate communication with the Hong Kong Stock Exchange. Furthermore, each
Director who is not an ordinarily resident in Hong Kong possesses or can apply for valid
travel documents to visit Hong Kong and can meet with the Hong Kong Stock Exchange
within a reasonable period.

(c) we have appointed a compliance adviser, Somerley Capital Limited, pursuant to Rules
3A.19 and 19A.05 of the Listing Rules, which will act as our additional and alternative
channel of communication with the Hong Kong Stock Exchange, and its representative(s)
will be fully available to answer enquiries from the Hong Kong Stock Exchange. The
compliance adviser will have access at all times to our authorised representatives, our
Directors and the other senior management of our Company to ensure that it is in a position
to provide prompt responses to any queries or requests from the Hong Kong Stock
Exchange in respect of our Company.

3. Waiver in Relation to Joint Company Secretaries

Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary must be an
individual who, by virtue of his academic or professional qualifications or relevant experience, is, in
the opinion of the Stock Exchange, capable of discharging the functions of the company secretary.
Pursuant to Note (1) to Rule 3.28 of the Listing Rules, the Stock Exchange considers the following
academic or professional qualifications to be acceptable:

(a) a Member of The Hong Kong Institute of Chartered Secretaries;

— 367 —
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159 of the
Laws of Hong Kong); or

(c) a certified public accountant as defined in the Professional Accountants Ordinance (Chapter
50 of the Laws of Hong Kong).

Pursuant to Note (2) to Rule 3.28 of the Listing Rules, in assessing “relevant experience”, the
Stock Exchange will consider the individual’s:

(a) length of employment with the issuer and other issuers and the roles he or she played;

(b) familiarity with the Listing Rules and other relevant law and regulations including the
Securities and Futures Ordinance, Companies Ordinance and the Takeovers Code;

(c) relevant training taken and/or to be taken in addition to the minimum requirement under
Rule 3.29 of the Listing Rules; and

(d) professional qualifications in other jurisdictions.

Our Company appointed Mr. Yongbo Zhang (“Mr. Zhang”) and Ms. Ella Wai Yee Wong (“Ms.
Wong”) as joint company secretaries of the Company upon Listing. Ms. Wong is a chartered secretary
and an associate member of the Hong Kong Institute of Chartered Secretaries and therefore meets the
qualification requirements under Note 1 to Rule 3.28 of the Listing Rules and is in compliance with
Rule 8.17 of the Listing Rules.

Mr. Yongbo Zhang (張勇博), aged 39, is the chief legal officer and secretary of the Board of our
Company. He is primarily responsible for overseeing compliance and legal affairs, internal control and
corporate governance of the Company. Mr. Zhang obtained a master’s degree in international
economic law from the East China University of Political Science and Law (華東政法大學) in July
2007. Mr. Zhang served as a legal officer of Yongcheng Property Insurance Co., Ltd (永誠財產保險
股份有限公司) between 2011 and 2013. Prior to that, he was involved in compliance matters at
Manulife-Sinochem Life Co., Ltd. (中宏人壽保險有限公司) from 2007 to 2011. Mr. Zhang has been
an accredited lawyer in the PRC since 2000.

Accordingly, whilst Mr. Zhang does not possess the formal qualifications required of a company
secretary under Rule 3.28 of the Listing Rules, we have applied to the Stock Exchange for, and the
Stock Exchange has agreed to grant, a waiver from strict compliance with the requirements under
Rules 3.28 and 8.17 of the Listing Rules such that Mr. Zhang may be appointed as a joint company
secretary of our Company.

The waiver was granted for a three year period on the condition that Ms. Wong, as joint company
secretary, will work closely with, and provide assistance to, Mr. Zhang in the discharge of his duties
as a joint company secretary and in gaining the relevant experience as required under Rule 3.28 of the
Listing Rules. In addition, Mr. Zhang will comply with the annual professional training requirement
under Rule 3.29 of the Listing Rules and will enhance his knowledge of the Listing Rules during the
three-year period from the Listing Date. Our Company will further ensure that Mr. Zhang has access

— 368 —
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

to the relevant training and support that would enhance his understanding of the Listing Rules and the
duties of a company secretary of an issuer listed on the Stock Exchange. At the end of the three-year
period, the qualifications and experience of Mr. Zhang and the need for on-going assistance of Ms.
Wong will be further evaluated by our Company. We will liaise with the Stock Exchange to enable it
to assess whether Mr. Zhang, having benefited from the assistance of Ms. Wong for the preceding three
years, will have acquired the skills necessary to carry out the duties of company secretary and the
relevant experience within the meaning of Rule 3.28 Note 2 of the Listing Rules so that a further
waiver will not be necessary.

Please refer to the section headed “Directors, Supervisors and Senior Management” in this
prospectus for further information regarding the qualifications of Mr. Zhang and Ms. Wong.

4. Waiver in Relation to Clawback Mechanism

Under Paragraph 4.2 of Practice Note 18 to the Listing Rules, where an initial public offering
includes both a placing tranche and a public subscription tranche, the minimum allocation of shares
to the public subscription tranche shall be an initial allocation of 10% of the shares offered in the
initial public offering and subject to a clawback mechanism that increases the number of shares
available in the public subscription tranche depending on the demand for those shares as set out in the
paragraph. We have applied to the Stock Exchange for, and the Stock Exchange has granted us, a
waiver from strict compliance with Paragraph 4.2 of Practice Note 18 to the Listing Rules such that,
in the event of over-subscription, the alternative clawback mechanism shall be applied to the
provisions under Paragraph 4.2 of Practice Note 18 of the Listing Rules, following the closing of the
application lists, subject to the condition that the initial allocation of Shares under the Hong Kong
Public Offering shall not be less than 5% of the Global Offering. For further information of such
clawback mechanism, please see the section headed “Structure of the Global Offering — The Hong
Kong Public Offering — Reallocation”.

— 369 —
FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS

See the section headed “Business — Our Strategies” in this prospectus for a detailed description
of our future plans.

USE OF PROCEEDS

The table below sets forth our estimated net proceeds from the Global Offering, after deduction
of estimated underwriting fees and commissions, incentive fees and expenses in relation to the Global
Offering payable by the Company:

Assuming the Assuming the


Over-allotment Option has Over-allotment Option has
not been exercised been exercised in full

Assuming an Offer Price of HK$56.70 per H


Share (being the mid-point of the indicative Approximately Approximately
Offer Price range). . . . . . . . . . . . . . . . . . . . . . . HK$10,948 million HK$12,601 million
Assuming an Offer Price of HK$59.70 per H
Share (being the high end of the indicative Approximately Approximately
Offer Price range) . . . . . . . . . . . . . . . . . . . . . . HK$11,531 million HK$13,271 million
Assuming an Offer Price of HK$53.70 per H
Share (being the low end of the indicative Approximately Approximately
Offer Price range) . . . . . . . . . . . . . . . . . . . . . . HK$10,365 million HK$11,930 million

We intend to use the net proceeds from the Global Offering for strengthening our capital base
to support our business growth.

Pending the deployment of the net proceeds from the Global Offering as described, the Company
currently intends to deposit such net proceeds into short-term interest bearing deposits and/or money
market instruments.

— 370 —
UNDERWRITING

HONG KONG UNDERWRITERS

J.P. Morgan Securities (Asia Pacific) Limited


Credit Suisse (Hong Kong) Limited
UBS AG Hong Kong Branch
CMB International Capital Limited
China International Capital Corporation Hong Kong Securities Limited
Ping An of China Securities (Hong Kong) Company Limited
Morgan Stanley Asia Limited
ICBC International Securities Limited
BOCI Asia Limited
ABCI Securities Company Limited
Head & Shoulders Securities Limited
Futu Securities International (Hong Kong) Limited
Essence International Securities (Hong Kong) Limited

HONG KONG UNDERWRITING ARRANGEMENTS

Hong Kong Public Offering

Hong Kong Underwriting Agreement

Pursuant to the Hong Kong Underwriting Agreement entered into on September 14, 2017, our
Company is offering initially 9,964,800 Hong Kong Offer Shares (subject to reallocation) for
subscription by way of the Hong Kong Public Offering at the Offer Price on and subject to the terms
and conditions of this prospectus and the Application Forms.

Subject to the Listing Committee of the Hong Kong Stock Exchange granting listing of, and
permission to deal in, the H Shares to be issued and sold pursuant to the Global Offering (including
any additional H Shares which may be issued and/or sold pursuant to the exercise of the
Over-allotment Option) as mentioned herein and to certain other conditions set out in the Hong Kong
Underwriting Agreement, the Hong Kong Underwriters have severally agreed to subscribe or procure
subscriptions for their respective applicable proportions of the Hong Kong Offer Shares now being
offered but which are not taken up under the Hong Kong Public Offering on the terms and conditions
of this prospectus, the Application Forms and the Hong Kong Underwriting Agreement.

The Hong Kong Underwriting Agreement is conditional on and subject to, among other things,
the International Underwriting Agreement having been signed and becoming unconditional.

— 371 —
UNDERWRITING

Grounds for Termination

The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for the Hong
Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to termination, if, at any
time prior to 8:00 a.m. on the day that trading in the H Shares commences on the Hong Kong Stock
Exchange:

(a) there develops, occurs, exists or comes into effect:

(i) any local, national, regional or international event or circumstance in the nature of
force majeure (including, without limitation, any acts of government, declaration of
a national or international emergency or war, calamity, crisis, epidemic, pandemic,
outbreak of disease, economic sanctions, strikes, lock-outs, fire, explosion, flooding,
earthquake, volcanic eruption, civil commotion, riots, public disorder, acts of war,
outbreak or escalation of hostilities (whether or not war is declared), acts of God or
acts of terrorism) in or affecting Hong Kong, the PRC, the United States, the United
Kingdom, the European Union (or any member thereof) or Japan (each a “Relevant
Jurisdiction”); or

(ii) any change, or any development involving a prospective change, or any event or
circumstance resulting in any change or development involving a prospective change,
in any local, national, regional or international financial, economic, political, military,
industrial, fiscal, regulatory, currency, credit or market conditions (including, without
limitation, conditions in the equity securities, stock and bond markets, money and
foreign exchange markets, the inter bank markets and credit markets, a change in the
system under which the value of the Hong Kong currency is linked to that of the
currency of the United States or a devaluation of the Hong Kong dollar or an
appreciation of the Renminbi against any foreign currencies) in or affecting any
Relevant Jurisdiction; or

(iii) any moratorium, suspension or restriction in or on trading in securities generally on


the SEHK, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the New
York Stock Exchange, the NASDAQ Global Market, the London Stock Exchange or
the Tokyo Stock Exchange; or

(iv) any general moratorium on commercial banking activities in any Relevant Jurisdiction
declared by the relevant Authorities, or any material disruption in commercial banking
or foreign exchange trading or securities settlement or clearance services, procedures
or matters in or affecting any Relevant Jurisdiction; or

(v) any new law or regulation or any change or any development involving a prospective
change in (or in the interpretation or application by any court or other competent
authority of) existing laws or regulations, in each case, in or affecting any Relevant
Jurisdiction; or

— 372 —
UNDERWRITING

(vi) a change or development involving a prospective change in or affecting taxation or


exchange control, currency exchange rates or foreign investment regulations, in any
Relevant Jurisdiction, adversely affecting an investment in the H Shares; or

(vii) any litigation or claim of any third party being threatened or instigated against any
member of the Group; or

(viii) a Director being charged with an indictable offence or prohibited by operation of law
or otherwise disqualified from taking part in the management or being a director of
a company; or

(ix) an authority or a political body or organization in any Relevant Jurisdiction


commencing any investigation or other action, or announcing an intention to
investigate or take other action, against any Director; or

(x) a contravention by any member of the Group of the Listing Rules, the Companies
Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the
Securities and Futures Ordinance, the PRC Company Law or applicable Laws; or

(xi) a prohibition on the Company for whatever reason from offering, allotting, issuing or
selling any of the H Shares (including any additional H Shares that may be issued
pursuant to the exercise of the Over-Allotment Option) pursuant to the terms of the
Global Offering; or

(xii) non-compliance of this prospectus (or any other documents used in connection with
the contemplated offer and sale of the H Shares) or any aspect of the Global Offering
with the Listing Rules or any other applicable Laws; or

(xiii) the issue or requirement to issue by the Company of any supplement or amendment to
this prospectus (or to any other documents used in connection with the contemplated
offer and sale of the H Shares) pursuant to the Companies (Winding-Up and
Miscellaneous Provisions) Ordinance or the Listing Rules or any requirement or
request of the SEHK and/or the SFC; or

(ix) an order or petition for the winding up of any member of the Group or any
composition or arrangement made by any member of the Group with its creditors or
a scheme of arrangement entered into by any member of the Group or any resolution
for the winding-up of any member of the Group or the appointment of a provisional
liquidator, receiver or manager over all or part of the material assets or undertaking
of any member of the Group or anything analogous thereto occurring in respect of any
member of the Group,

which, individually or in the aggregate, and in the sole opinion of the Joint Global Coordinators: (1)
has or will have or likely to have a material adverse effect on the assets, liabilities, business, general
affairs, management, prospects, shareholders’ equity, profits, losses, results of operations, position or

— 373 —
UNDERWRITING

condition, financial or otherwise, or performance of the Group as a whole; or (2) has or will have or
likely to have a material adverse effect on the success of the Global Offering or the level of
applications under the Hong Kong Public Offering or the level of interest under the International
Offering; or (3) makes or will make or likely to make it inadvisable or impracticable for the Global
Offering to proceed or to market the Global Offering; or (4) has or will have or likely to have the effect
of making any part of the Hong Kong Underwriting Agreement (including underwriting) incapable of
performance in accordance with its terms or preventing the processing of applications and/or payments
pursuant to the Global Offering or pursuant to the underwriting thereof; or (5) makes or will make it
impracticable to proceed with the delivery of the H Shares on the terms and in the manner
contemplated by this prospectus, the Application Forms, the formal notice; or

(b) there has come to the notice of the Joint Global Coordinators:

(i) that any statement contained in any of this prospectus, the Application Forms,
the disclosure package, the final offering circular and any other document
issued, given or used in connection with the offering and the sale of the Offer
Shares or otherwise in connection with the Global Offering, including, without
limitation, any roadshow materials relating to the Offer Shares (the “Offering
Document”) and/or in any notices, announcements, advertisements,
communications or other documents issued or used by or on behalf of the
Company in connection with the Global Offering (including any supplement or
amendment thereto) was, when it was issued, or has become, untrue, incorrect or
misleading in any material respect, or that any forecast, estimate, expression of
opinion, intention or expectation contained in any of the Offering Documents
and/or any notices, announcements, advertisements, communications or other
documents issued or used by or on behalf of the Company in connection with the
Global Offering (including any supplement or amendment thereto) is not fair and
honest and based on reasonable assumptions; or

(ii) that any matter has arisen or has been discovered which would, had it arisen or
been discovered immediately before the date of this prospectus, constitute a
material omission from any of the Offering Documents and/or in any notices,
announcements, advertisements, communications or other documents issued or
used by or on behalf of the Company in connection with the Global Offering
(including any supplement or amendment thereto); or

(iii) any material breach of any of the obligations imposed upon any party to the
Hong Kong Underwriting Agreement or the International Underwriting
Agreement (other than upon any of the Hong Kong Underwriters or the
International Underwriters); or

(iv) any event, act or omission which gives or is likely to give rise to any liability
of any of the indemnifying parties under the Hong Kong Underwriting
Agreement pursuant to the Hong Kong Underwriting Agreement; or

— 374 —
UNDERWRITING

(v) any material adverse change, or any development involving a prospective


material adverse change, in the assets, liabilities, business, general affairs,
management, prospects, shareholders’ equity, profits, losses, results of
operations, position or condition, financial or otherwise, or performance of the
Group as a whole; or

(vi) any breach of, or any event or circumstance rendering untrue or incorrect in any
respect, any of the warranties under the Hong Kong Underwriting Agreement; or

(vii) that approval by the Listing Committee of the SEHK of the listing of, and
permission to deal in, the H Shares to be issued or sold (including any additional
H Shares that may be issued or sold pursuant to the exercise of the
Over-Allotment Option) under the Global Offering is refused or not granted,
other than subject to customary conditions, on or before the Listing Date, or if
granted, that the approval is subsequently withdrawn, qualified (other than by
customary conditions) or withheld; or

(viii) a withdrawal by the Company of this prospectus (and/or any other documents
issued or used in connection with the Global Offering) or the Global Offering;
or

(ix) that the Cornerstone Investment Agreement has been terminated or there is a
material breach of the Cornerstone Investment Agreement by the investor,

then the Joint Global Coordinators shall be entitled to (for themselves and on behalf of the Hong Kong
Underwriters), by notice in writing to the Company, terminate the Hong Kong Underwriting
Agreement with immediate effect.

UNDERTAKINGS TO THE HONG KONG STOCK EXCHANGE PURSUANT TO THE LISTING


RULES

Undertakings by Our Company

Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Hong Kong Stock
Exchange that, no further Shares or securities convertible into our equity securities (whether or not
of a class already listed) shall be issued by us or form the subject of any agreement to such an issue
within six months from the Listing Date (whether or not such issue of Shares or our securities will
be completed within six months from the Listing Date), except for Shares issued pursuant to (i) the
Global Offering (including any exercise of the Over-allotment option); or (ii) any of the circumstances
provided under Rule 10.08 of the Listing Rules.

— 375 —
UNDERWRITING

UNDERTAKINGS PURSUANT TO THE HONG KONG UNDERWRITING AGREEMENT

Undertaking by Our Company

We have, pursuant to the Hong Kong Underwriting Agreement, undertaken to each of the Joint
Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers and the
Hong Kong Underwriters not to (except for the issue of the Offer Shares pursuant to the Global
Offering, including pursuant to any exercise of the Over-allotment Option), during the period
commencing on the date of the Hong Kong Underwriting Agreement and ending on, and including, the
date that is six months after the Listing Date (the “First Six-Month Period”), without the prior
written consent of the Joint Sponsors and the Joint Global Coordinators (on behalf of the Hong Kong
Underwriters) and unless in compliance with the requirements in the Listing Rules (and only after the
consent of any relevant PRC authority (if so required) have been obtained):

(i) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree to
allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option,
warrant, contract or right to subscribe for or purchase, grant or purchase any option,
warrant, contract or right to allot, issue or sell, or otherwise transfer or dispose of or create
an encumbrance over, or agree to transfer or dispose of or create an encumbrance over,
either directly or indirectly, conditionally or unconditionally, any H Shares or other
securities of the Company, or any interest in any of the foregoing (including, without
limitation, any securities convertible into or exchangeable or exercisable for or that
represent the right to receive, or any warrants or other rights to purchase, any H Shares, or
deposit any H Shares or other securities of the Company, with a depositary in connection
with the issue of depositary receipts; or

(ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership of any H Shares, debt capital or other securities
of the Company, or any interest in any of the foregoing (including, without limitation, any
securities convertible into or exchangeable or exercisable for or that represent the right to
receive, or any warrants or other rights to purchase, any H Shares; or

(iii) enter into any transaction with the same economic effect as any transaction specified in
paragraphs (i) or (ii) above; or

(iv) offer to or agree to or announce or publicly disclose any intention to effect any transaction
specified in paragraphs (i), (ii) or (iii) above,

in each case, whether any of the transactions specified in paragraphs (i), (ii) or (iii) above is to be
settled by delivery of H Shares or other securities of the Company, as applicable, or in cash or
otherwise (whether or not the issue of such H Shares or other shares or securities will be completed
within the First Six-Month Period), provided that the foregoing restrictions shall not apply to the issue

— 376 —
UNDERWRITING

of H Share by the Company pursuant to the Global Offering (including any additional H Shares that
may be issued pursuant to the exercise of the Over-Allotment Option). In the event that, during the
period of six months commencing on the date on which the First Six-Month Period expires (the
“Second Six-Month Period”), the Company enters into any of the transactions specified in paragraphs
(i), (ii) or (iii) above or offers to or agrees to or announces or publicly discloses any intention to effect
any such transaction, the Company undertakes to take all reasonable steps to ensure that such
transaction, agreement, announcement or disclosure (as the case may be) will not create a disorderly
or false market in the securities of the Company.

INTERNATIONAL OFFERING

International Underwriting Agreement

In connection with the International Offering, it is expected that we will enter into the
International Underwriting Agreement with, amongst others, the Joint Global Coordinators and the
International Underwriters. Under the International Underwriting Agreement, the International
Underwriters, subject to certain conditions, will agree severally to purchase, or procure purchasers for,
the International Offer Shares being offered pursuant to the International Offering.

We expect to grant the Over-allotment Option to the International Underwriters, exercisable by


the Joint Global Coordinators for themselves and on behalf of the International Underwriters, on or
before Saturday, October 21, 2017, being the 30th day from the last day for the lodging of Application
Forms under the Hong Kong Public Offering, to require us to issue and allot, up to an aggregate of
29,894,000 H Shares, representing in aggregate approximately 15% of the Offer Shares initially
available under the Global Offering at the Offer Price to cover over-allocations, if any, in the
International Offering.

COMMISSION AND EXPENSES

The Hong Kong Underwriters will receive an underwriting commission of 2.5% of the aggregate
Offer Price payable for the Hong Kong Offer Shares initially offered under the Hong Kong Public
Offering. For unsubscribed Hong Kong Offer Shares reallocated to the International Offering, we will
pay an underwriting commission at the rate applicable to the International Offering and such
commission will be paid to the relevant International Underwriters and not the Hong Kong
Underwriters.

The aggregate commissions and fees, together with the listing fees, SFC transaction levy, the
Hong Kong Stock Exchange trading fee, legal and other professional fees, printing and other expenses
payable by us relating to the Global Offering are estimated to amount to approximately HK$352.0
million in total (based on the Offer Price of HK$56.70 per Offer Share and assuming the
Over-allotment Option is not exercised).

— 377 —
UNDERWRITING

HONG KONG UNDERWRITERS’ INTERESTS IN OUR COMPANY

Save as disclosed in this prospectus, save for its obligations under the Hong Kong Underwriting
Agreement, none of the Hong Kong Underwriters has any shareholding in any member of our Group
or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe
for securities in any member of our Group.

Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their obligations
under the Hong Kong Underwriting Agreement and/or the International Underwriting Agreement.

JOINT SPONSORS’ INDEPENDENCE

Each of the Joint Sponsors satisfies the independence criteria set out in Rule 3A.07 of the Hong
Kong Listing Rules.

STABILIZATION

Stabilization is a practice used by underwriters in some markets to facilitate the distribution of


securities. To stabilize, the Underwriters may bid for, or purchase, the new securities in the secondary
market, during a specified period of time, to retard and, if possible, prevent any decline in the market
price of the securities below the Offer Price. In Hong Kong and certain other jurisdictions, activity
aimed at reducing the market price is prohibited and the price at which stabilization is effected is not
permitted to exceed the Offer Price.

In connection with the Global Offering, the Stabilizing Manager, its affiliates or any person
acting for it, on behalf of the Underwriters, may, to the extent permitted by applicable laws of Hong
Kong or elsewhere, over-allocate or effect short sales or any other stabilizing transactions with a view
to stabilizing or maintaining the market price of the H Shares at a level higher than that which might
otherwise prevail in the open market for a limited period after the last day for the lodging of
applications under the Hong Kong Public Offering. Any market purchases of H Shares will be effected
in compliance with all applicable laws and regulatory requirements. However, there is no obligation
on the Stabilizing Manager or any person acting for it to conduct any such stabilizing activity, which
if commenced, will be done at the absolute discretion of the Stabilizing Manager and may be
discontinued at any time. Any such stabilizing activity is required to be brought to an end within 30
days of the last day for the lodging of applications under the Hong Kong Public Offering. The number
of H Shares that may be over-allocated will not exceed the number of H Shares that may be issued
and/or sold under the Over-allotment Option, namely 29,894,000 H Shares, which is approximately
15% of the Offer Shares initially available under the Global Offering.

Stabilizing action will be entered into in accordance with the laws, rules and regulations in place
in Hong Kong on stabilization and stabilization action permitted in Hong Kong pursuant to the
Securities and Futures (Price Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) includes:
(i) over-allocation for the purpose of preventing or minimizing any reduction in the market price of
the H Shares; (ii) selling or agreeing to sell the H Shares so as to establish a short position in them
for the purpose of preventing or minimizing any reduction in the market price of the H Shares; (iii)

— 378 —
UNDERWRITING

purchasing or subscribing for, or agreeing to purchase or subscribe for, the H Shares pursuant to the
Over-allotment Option in order to close out any position established under (i) or (ii) above; (iv)
purchasing, or agreeing to purchase, any of the H Shares for the sole purpose of preventing or
minimizing any reduction in the market price of the H Shares; (v) selling or agreeing to sell any H
Shares in order to liquidate any position held as a result of those purchases; and (vi) offering or
attempting to do anything described in (ii), (iii), (iv) or (v).

Specifically, prospective applicants for and investors in the Offer Shares should note that:

(i) the Stabilizing Manager, or any person acting for it, may, in connection with the stabilizing
action, maintain a long position in the H Shares;

(ii) there is no certainty regarding the extent to which and the time period for which the
Stabilizing Manager, or any person acting for it, will maintain such a position;

(iii) liquidation of any such long position by the Stabilizing Manager may have an adverse
impact on the market price of the H Shares;

(iv) no stabilizing action can be taken to support the price of the H Shares for longer than the
stabilizing period which will begin on the Listing Date following announcement of the
Offer Price, and is expected to expire on Saturday, October 21, 2017, being the 30th day
after the last date for lodging applications under the Hong Kong Public Offering. After this
date, when no further stabilizing action may be taken, demand for the H Shares, and
therefore the price of the H Shares, could fall;

(v) the price of the H Shares cannot be assured to stay at or above the Offer Price either during
or after the stabilizing period by the taking of any stabilizing action; and

(vi) stabilizing bids may be made or transactions effected in the course of the stabilizing action
at any price at or below the Offer Price, which means that stabilizing bids may be made or
transactions effected at a price below the price paid by applicants for, or investors in, the
H Shares.

Our Company will procure that a public announcement in compliance with the Securities and
Futures (Price Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) will be made within
seven days of the expiration of the stabilizing period.

In connection with the Global Offering, the Stabilizing Manager may over-allocate up to and not
more than an aggregate of 29,894,000 H Shares and cover such over-allocations by (amongst other
methods) exercising the Over-allotment Option, making purchases in the secondary market at prices
that do not exceed the Offer Price or by any combination of these means.

— 379 —
STRUCTURE OF THE GLOBAL OFFERING

THE GLOBAL OFFERING

This prospectus is published in connection with the Hong Kong Public Offering as part of the
Global Offering.

The Global Offering consists of (subject to adjustment and the Over-allotment Option):

(i) the Hong Kong Public Offering of 9,964,800 H Shares (subject to adjustment as mentioned
below) in Hong Kong as described in “The Hong Kong Public Offering” below; and

(ii) the International Offering of an aggregate of initially 189,329,100 H Shares (subject to


adjustment and Over-allotment Option as mentioned below) in the United States with QIBs
in reliance on Rule 144A or another available exemption from the registration requirements
of the U.S. Securities Act, and outside the United States to non-U.S. persons in offshore
transactions in reliance on Regulation S.

The Offer Shares will represent approximately 13.84% of the enlarged issued share capital of our
Company immediately after completion of the Global Offering without taking into account the
exercise of the Over-allotment Option. If the Over-allotment Option is exercised in full, the Offer
Shares will represent approximately 15.59% of the enlarged issued share capital immediately
following the completion of the Global Offering and the exercise of the Over-allotment Option as set
out in “The International Offering — Over-allotment Option” below.

Investors may apply for the Hong Kong Offer Shares under the Hong Kong Public Offering or
indicate an interest, if qualified to do so, for the International Offer Shares under the International
Offering, but may not do both. The Hong Kong Public Offering is open to members of the public in
Hong Kong as well as to institutional and professional investors in Hong Kong. The International
Offering will involve selective marketing of the International Offer Shares to QIBs in the United
States in reliance on Rule 144A or another available exemption from the registration requirements of
the U.S. Securities Act, as well as to institutional and professional investors and other investors
expected to have a sizeable demand for the International Offer Shares in Hong Kong and other
jurisdictions outside the United States to non-U.S. persons in offshore transactions in reliance on
Regulation S. The International Underwriters and the Joint Bookrunners are soliciting from
prospective investors’ indications of interest in acquiring the International Offer Shares. Prospective
investors will be required to specify the number of International Offer Shares under the International
Offering they would be prepared to acquire either at different prices or at a particular price.

The number of Hong Kong Offer Shares and International Offer Shares to be offered under the
Hong Kong Public Offering and the International Offering respectively may be subject to reallocation
as described in “The Hong Kong Public Offering — Reallocation and Clawback” below.

— 380 —
STRUCTURE OF THE GLOBAL OFFERING

THE HONG KONG PUBLIC OFFERING

Number of Shares Initially Offered

Our Company is initially offering 9,964,800 H Shares at the Offer Price under the Hong Kong
Public Offering, representing 5.00% of the 199,293,900 H Shares initially available under the Global
Offering, for subscription by the public in Hong Kong. Subject to reallocation as mentioned below,
the number of H Shares initially offered under the Hong Kong Public Offering will represent 0.69%
of our total issued share capital immediately after completion of the Global Offering, assuming that
the Over-allotment Option is not exercised.

In Hong Kong, individual retail investors are expected to apply for the Hong Kong Offer Shares
through the Hong Kong Public Offering and individual retail investors, including individual investors
in Hong Kong applying through banks and other institutions, seeking International Offer Shares will
not be allotted International Offer Shares in the International Offering.

The Joint Global Coordinators (on behalf of the Underwriters) and the Joint Sponsors may
require any investor who has been offered H Shares under the International Offering, and who has
made an application under the Hong Kong Public Offering to provide sufficient information to the
Joint Global Coordinators and the Joint Sponsors so as to allow them to identify the relevant
applications under the Hong Kong Public Offering and to ensure that it is excluded from any
application for the Hong Kong Offer Shares.

Allocation

For allocation purposes only, the 9,964,800 H Shares initially being offered for subscription
under the Hong Kong Public Offering (after taking into account any adjustment in the number of Offer
Shares allocated between the Hong Kong Public Offering and the International Offering) will be
divided equally into two pools (subject to adjustment at odd lot size): Pool A comprising 4,982,400
Hong Kong Offer Shares and Pool B comprising 4,982,400 Hong Kong Offer Shares, both of which
are available on an equitable basis to successful applicants. All valid applications that have been
received for the Hong Kong Offer Shares with a total subscription amount (excluding brokerage, SFC
transaction levy and the Hong Kong Stock Exchange trading fee) of HK$5 million or below will fall
into Pool A and all valid applications that have been received for the Hong Kong Offer Shares with
a total subscription amount (excluding brokerage, SFC transaction levy and Hong Kong Stock
Exchange trading fee) of over HK$5 million and up to the total value of Pool B, will fall into Pool
B.

Applicants should be aware that applications in Pool A and Pool B are likely to receive different
allocation ratios. If the Hong Kong Offer Shares in one pool (but not both pools) are under-subscribed,
the surplus Hong Kong Offer Shares will be transferred to the other pool to satisfy demand in that
other pool and be allocated accordingly. Applicants can only receive an allocation of the Hong Kong
Offer Shares from either Pool A or Pool B but not from both pools and only apply for Hong Kong Offer
Shares in either Pool A or Pool B. When there is over-subscription, allocation of the Hong Kong Offer
Shares to investors under the Hong Kong Public Offering, both in relation to Pool A and Pool B, will
be based on the level of valid applications received under the Hong Kong Public Offering. The basis

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STRUCTURE OF THE GLOBAL OFFERING

of allocation in each pool may vary, depending on the number of Hong Kong Offer Shares validly
applied for by each applicant. The allocation of Hong Kong Offer Shares could, where appropriate,
consist of balloting, which would mean that some applicants may receive a higher allocation than
others who have applied for the same number of Hong Kong Offer Shares and those applicants who
are not successful in the ballot may not receive any Hong Kong Offer Shares.

Reallocation and Clawback

The allocation of Shares between the Hong Kong Public Offering and the International Offering
is subject to adjustment. If the number of H Shares validly applied for in the Hong Kong Public
Offering represents (i) 15 times or more but less than 50 times, (ii) 50 times or more but less than 100
times, and (iii) 100 times or more, of the number of Hong Kong Offer Shares initially available under
the Hong Kong Public Offering, the total number of Hong Kong Offer Shares available under the Hong
Kong Public Offering will be increased to 14,947,200, 19,929,400 and 39,858,800 H Shares,
respectively, representing approximately 7.50% (in the case of (i)), 10.00% (in the case of (ii)) and
20.00% (in the case of (iii)), respectively, of the total number of Offer Shares initially available under
the Global Offering (before any exercise of the Over-allotment Option), and such reallocation being
referred to in this prospectus as “Mandatory Reallocation”. In such cases, the number of Offer Shares
allocated in the International Offering will be correspondingly reduced, in such manner as the Joint
Global Coordinators and the Joint Sponsors deem appropriate, and such additional Offer Shares will
be reallocated to Pool A and Pool B. If the Hong Kong Offer Shares are not fully subscribed, the Joint
Global Coordinators have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares
to the International Offering, in such proportions as the Joint Global Coordinators and the Joint
Sponsors deem appropriate. In addition to any Mandatory Reallocation which may be required, the
Joint Global Coordinators and the Joint Sponsors may, at their discretion, reallocate Shares initially
allocated for the International Offering to the Hong Kong Public Offering to satisfy valid applications
in Pool A and Pool B under the Hong Kong Public Offering, regardless of whether the Mandatory
Reallocation is triggered.

Applications

Each applicant under the Hong Kong Public Offering will also be required to give an undertaking
and confirmation in the Application Form submitted by him that he and any person(s) for whose
benefit he is making the application have not applied for or taken up, or indicated an interest for, and
will not apply for or take up, or indicate an interest for, any Offer Shares under the International
Offering, and such applicant’s application is liable to be rejected if the said undertaking and/or
confirmation is breached and/or untrue (as the case may be) or it has been or will be placed or
allocated Offer Shares under the International Offering.

Multiple or suspected multiple applications and any application for more than 50% of the
9,964,800 H Shares initially comprised in the Hong Kong Public Offering (which is 4,982,400 Hong
Kong Offer Shares) are liable to be rejected.

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STRUCTURE OF THE GLOBAL OFFERING

The listing of the Offer Shares on the Hong Kong Stock Exchange is sponsored by the Joint
Sponsors. Applicants under the Hong Kong Public Offering are required to pay, on application, the
Offer Price of HK$59.70 per H Share in addition to any brokerage, SFC transaction levy and Hong
Kong Stock Exchange trading fee payable on each Offer Share. Further details are set out below in
the section entitled “How to Apply for Hong Kong Offer Shares”.

References in this prospectus to applications, Application Forms, application monies or the


procedure for application relate solely to the Hong Kong Public Offering.

THE INTERNATIONAL OFFERING

Number of International Offer Shares Offered

The number of International Offer Shares to be initially offered and sold by us for subscription
under the International Offering will consist of an initial offering of 189,329,100 Offer Shares,
representing 95.00% of the Offer Shares under the Global Offering. Subject to any reallocation of
Offer Shares between the International Offering and the Hong Kong Public Offering, the International
Offer Shares will represent approximately 13.15% of our enlarged issued share capital immediately
after completion of the Global Offering assuming that the Over-allotment Option is not exercised.

Allocation

Pursuant to the International Offering, the International Underwriters will conditionally place the
International Offer Shares with QIBs in the United States in reliance on Rule 144A or another
available exemption from the registration requirements under the U.S. Securities Act, as well as with
institutional and professional investors and other investors who are not a U.S. person and expected to
have a sizeable demand for the Shares in Hong Kong and other jurisdictions outside the United States
in reliance on Regulation S. The International Offering is subject to the Hong Kong Public Offering
being unconditional.

Allocation of the International Offer Shares pursuant to the International Offering will be
determined by the Joint Global Coordinators and will be based on a number of factors including the
level and timing of demand, total size of the relevant investor’s invested assets or equity assets in the
relevant sector and whether or not it is expected that the relevant investor is likely to buy further,
and/or hold or sell Offer Shares after the Listing. Such allocation may be made to professional,
institutional and corporate investors and is intended to result in a distribution of our Offer Shares on
a basis which would lead to the establishment of a solid shareholder base to the benefit of our
Company and our Shareholders as a whole.

Reallocation

The total number of International Offer Shares to be transferred pursuant to the International
Offering may change as a result of the clawback arrangement described in “The Hong Kong Public
Offering — Reallocation and Clawback,” exercise of the Over-allotment Option in whole or in part
and/or reallocation of all or any unsubscribed Hong Kong Offer Shares to the International Offering.

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STRUCTURE OF THE GLOBAL OFFERING

STABILIZATION

Stabilization is a practice used by underwriters in some markets to facilitate the distribution of


securities. To stabilize, the underwriters may bid for, or purchase, the newly issued securities in the
secondary market, during a specified period of time, to retard and, if possible, prevent a decline in the
initial public market price of the securities below the offer price. Such transactions may be effected
in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws
and regulatory requirements including those of Hong Kong. In Hong Kong, the price at which
stabilization is effected is not permitted to exceed the offer price.

In connection with the Global Offering, the Stabilizing Manager, or its affiliates or any person
acting for it, on behalf of the Underwriters, may over-allocate or effect transactions with a view to
stabilizing or supporting the market price of the H Shares at a level higher than that which might
otherwise prevail for a limited period after the Listing Date. However, there is no obligation on the
Stabilizing Manager, its affiliates or any person acting for it, to conduct any such stabilizing action.
Such stabilizing action, if commenced, will be conducted at the absolute discretion of the Stabilizing
Manager, its affiliates or any person acting for it and may be discontinued at any time, and is required
to be brought to an end after a limited period.

Stabilization action permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilizing) Rules, as amended, includes (i) over-allocating for the purpose of preventing or
minimizing any reduction in the market price of the H Shares, (ii) selling or agreeing to sell the H
Shares so as to establish a short position in them for the purpose of preventing or minimizing any
reduction in the market price of the H Shares, (iii) purchasing or subscribing for, or agreeing to
purchase or subscribe for, the Offer Shares pursuant to the Over-allotment Option in order to close out
any position established under (i) or (ii) above, (iv) purchasing, or agreeing to purchase, any of the
Offer Shares for the sole purpose of preventing or minimizing any reduction in the market price of the
H Shares, (v) selling or agreeing to sell any Offer Shares in order to liquidate any position established
as a result of those purchases and (vi) offering or attempting to do anything as described in paragraph
(ii), (iii), (iv) or (v).

Specifically, prospective applicants for and investors in the Offer Shares should note that:

• the Stabilizing Manager, its affiliates or any person acting for it may, in connection with
the stabilizing action, maintain a long position in the H Shares;

• there is no certainty regarding the extent to which or the time or period for which the
Stabilizing Manager, its affiliates or any person acting for it will maintain such a long
position;

• liquidation of any such long position by the Stabilizing Manager, its affiliates or any person
acting for it and selling in the open market may have an adverse impact on the market price
of the H Shares;

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STRUCTURE OF THE GLOBAL OFFERING

• no stabilizing action can be taken to support the price of the Shares for longer than the
stabilization period which will begin on the Listing Date, and is expected to expire on
Saturday, October 21, 2017, being the 30th day after the last day for lodging applications
under the Hong Kong Public Offering. After this date, when no further stabilizing action
may be taken, demand for the H Shares and therefore the price of the H Shares, could fall;

• the price of the H Shares cannot be assured to stay at or above the Offer Price by the taking
of any stabilizing action; and

• stabilizing bids or transactions effected in the course of the stabilizing action may be made
at any price at or below the Offer Price and can, therefore, be done at a price below the price
paid by the applicants for, or investors in, acquiring the Offer Shares.

Over-allocation

Following any over-allocation of Offer Shares in connection with the Global Offering, the Joint
Bookrunners, their affiliates or any person acting on their behalf may cover such over-allocation by,
among other methods, using H Shares purchased by the Stabilizing Manager, its affiliates or any
person acting for it in the secondary market, exercising the Over-allotment Option in full or in part,
or by a combination of these means. Any such purchases will be made in accordance with the laws,
rules and regulations in place in Hong Kong, including in relation to stabilization, the Securities and
Futures (Price Stabilizing) Rules, as amended, made under the SFO. The number of Offer Shares
which can be over-allocated will not exceed the number of H Shares which may be sold pursuant to
the exercise in full of the Over-allotment Option, being 29,894,000 H Shares, representing no more
than 15% of the Offer Shares initially available under the Global Offering.

PRICING OF THE GLOBAL OFFERING

The Offer Price will be not more than HK$59.70 per H Share and is currently expected not to
be less than HK$53.70 per H Share unless otherwise announced, as further explained below.
Applicants for Hong Kong Offer Shares are required to pay, on application, the maximum Offer Price
of HK$59.70 for each Hong Kong Offer Share together with brokerage of 1%, a Hong Kong Stock
Exchange trading fee of 0.005% and a SFC transaction levy of 0.0027%.

If, based on the level of interest expressed by prospective institutional, professional and other
investors during the book-building process, the Joint Global Coordinators (for themselves and on
behalf of the Underwriters) and the Joint Sponsors consider it appropriate, with our consent the
number of Offer Shares being offered under the Global Offering and/or the Offer Price may be reduced
below that stated in this prospectus at any time prior to the morning of the last day for lodging
applications under the Hong Kong Public Offering. In such a case, we will, as soon as practicable
following the decision to make such reduction, and in any event not later than the morning of
Thursday, September 21, 2017, being the last day for lodging applications under the Hong Kong Public
Offering, cause to be published in the South China Morning Post (in English) and the Hong Kong
Economic Times (in Chinese), on the Hong Kong Stock Exchange’s website at www.hkexnews.hk, and
on our Company’s website at https://www.zhongan.com notice of the reduction in the number of Offer

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STRUCTURE OF THE GLOBAL OFFERING

Shares being offered under the Global Offering and/or the Offer Price. Such notice will also include
confirmation or revision, as appropriate, of the working capital statement and the offering statistics
and any other financial information in this prospectus which may change as a result of such reduction.

Before submitting applications for the Hong Kong Offer Shares, applicants should have regard
to the possibility that any announcement of a reduction in the number of Offer Shares being offered
under the Global Offering and/or the Offer Price may not be made until the day which is the last day
for lodging applications under the Hong Kong Public Offering.

If applications for Hong Kong Offer Shares have been submitted prior to the day which is the
last day for lodging applications under the Hong Kong Public Offering, in the event that the number
of Offer Shares and/or the Offer Price is so reduced, such applications can subsequently be withdrawn.

The Hong Kong Offer Shares and the International Offer Shares may, in certain circumstances,
be reallocated as between the Hong Kong Public Offering and International Offering at the discretion
of the Joint Global Coordinators and the Joint Sponsors.

The level of applications in the Hong Kong Public Offering, the level of indications of interest
in the International Offering, the results of applications and basis of allotment of the Hong Kong Offer
Shares are expected to be announced on Wednesday, September 27, 2017 through a variety of channels
as described in “How to Apply for Hong Kong Offer Shares — 11. Publication of Results.”

UNDERWRITING ARRANGEMENTS

The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the
terms of the Hong Kong Underwriting Agreement.

We expect that our Company will, on or about Thursday, September 21, 2017, enter into the
International Underwriting Agreement relating to the International Offering. Underwriting
arrangements, the Hong Kong Underwriting Agreement and the International Underwriting Agreement
are summarized in “Underwriting”.

DEALING ARRANGEMENTS

Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in
Hong Kong on Thursday, September 28, 2017, it is expected that dealings in H Shares on the Hong
Kong Stock Exchange will commence on Thursday, September 28, 2017. H Shares will be traded in
board lots of 100 H Shares each.

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STRUCTURE OF THE GLOBAL OFFERING

CONDITIONS OF THE GLOBAL OFFERING

Acceptance of all applications for the Offer Shares will be conditional on, inter alia:

• the Listing Committee granting approval for the listing of, and permission to deal in, the
H Shares to be issued pursuant to the Global Offering (including pursuant to the exercise
of the Over-allotment Option) on the Main Board of the Stock Exchange and such listing
and permission not subsequently having been revoked prior to the commencement of
dealings in the H Shares on the Stock Exchange;

• our Company having submitted to the HKSCC all requisite documents to enable the Offer
Shares to be admitted to trade on the Hong Kong Stock Exchange; and

• the obligations of the Underwriters under the respective Underwriting Agreements


becoming and remaining unconditional (unless and to the extent such conditions are validly
waived on or before such dates and times) and not having been terminated in accordance
with the terms of the respective agreements,

in each case on or before the dates and times specified in the respective Underwriting Agreements
(unless and to the extent such conditions are validly waived on or before such dates and times) and
in any event not later than the date which is 30 days after the date of this prospectus.

If the above conditions are not fulfilled or waived prior to the times and dates specified, the
Global Offering will lapse and the Hong Kong Stock Exchange will be notified immediately. We will
cause a notice of the lapse of the Hong Kong Public Offering to be published by us in the South China
Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on the next day following
such lapse. In such event, all application monies will be returned, without interest, on the terms set
out in “How to Apply for Hong Kong Offer Shares”. In the meantime, the application monies will be
held in separate bank account(s) with the receiving banker(s) or other bank(s) in Hong Kong licensed
under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).

The consummation of each of the Hong Kong Public Offering and the International Offering is
conditional upon, amongst other things, the other becoming unconditional and not having been
terminated in accordance with its terms.

Share certificates for the Offer Shares are expected to be issued on Wednesday, September 27,
2017 but will only become valid certificates of title at 8:00 a.m. on the date of commencement of the
dealings in our H Shares, which is expected to be on Thursday, September 28, 2017, provided that (i)
the Global Offering has become unconditional in all respects and (ii) neither of the Underwriting
Agreements has been terminated in accordance with its terms. Investors who trade H Shares prior to
the receipt of share certificates or prior to the share certificates bearing valid certificates of title do
so entirely at their own risk.

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HOW TO APPLY FOR HONG KONG OFFER SHARES

1. HOW TO APPLY

If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an interest for
International Offer Shares.

To apply for Hong Kong Offer Shares, you may:

• use a WHITE or YELLOW Application Form;

• apply online via the HK eIPO White Form service at www.hkeipo.hk; or

• electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you
are a nominee and provide the required information in your application.

Our Company, the Joint Global Coordinators, the Joint Sponsors, the HK eIPO White Form
Service Provider and their respective agents may reject or accept any application in full or in part for
any reason at their discretion.

2. WHO CAN APPLY

You can apply for Hong Kong Offer Shares on a WHITE or YELLOW Application Form if you
or the person(s) for whose benefit you are applying:

• are 18 years of age or older;

• have a Hong Kong address;

• are outside the United States, and are not a United States Person (as defined in Regulation
S); and

• are not a legal or natural person of the PRC.

If you apply online through the HK eIPO White Form service, in addition to the above, you
must also: (i) have a valid Hong Kong identity card number and (ii) provide a valid e-mail address
and a contact telephone number.

If you are a firm, the application must be in the individual members’ names. If you are a body
corporate, the application form must be signed by a duly authorized officer, who must state his
representative capacity, and stamped with your corporation’s chop.

If an application is made by a person under a power of attorney, the Joint Global Coordinators
and the Joint Sponsors may accept it at their discretion and on any conditions they think fit, including
evidence of the attorney’s authority.

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HOW TO APPLY FOR HONG KONG OFFER SHARES

The number of joint applicants may not exceed four and they may not apply by means of HK
eIPO White Form service for the Hong Kong Offer Shares.

Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares if you
are:

• an existing beneficial owner of any Shares in our Company and/or any its subsidiaries;

• a Director or chief executive officer of our Company and/or any of its subsidiaries;

• a connected person (as defined in the Listing Rules) of our Company or will become a
connected person of our Company immediately upon completion of the Global Offering;

• an associate if any if the above; or

• have been allocated or have applied for any International Offer Shares or otherwise
participate in the International Offering.

3. APPLYING FOR HONG KONG OFFER SHARES

Which Application Channel to Use

For Hong Kong Offer Shares to be issued in your own name, use a WHITE Application Form
or apply online through www.hkeipo.hk.

For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use
a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC
Nominees to apply for you.

Where to Collect the Application Forms

You can collect a WHITE Application Form and a prospectus during normal business hours
between 9:00 a.m. on Monday, September 18, 2017 until 12:00 noon on Thursday, September 21, 2017:

(i) any of the following offices of the Joint Global Coordinators and the Hong Kong
Underwriters:

J.P. Morgan Securities (Asia Pacific) Limited


28/F, Chater House
8 Connaught Road
Central
Hong Kong

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HOW TO APPLY FOR HONG KONG OFFER SHARES

Credit Suisse (Hong Kong) Limited


L88, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

UBS AG Hong Kong Branch


52/F, Two International Finance Centre
8 Finance Street
Central
Hong Kong

CMB International Capital Limited


Units 1803-4, 18/F
Bank of America Tower
12 Harcourt Road
Central
Hong Kong

China International Capital Corporation Hong Kong Securities Limited


29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong

Ping An of China Securities (Hong Kong) Company Limited


28/F, 169 Electric Road, North Point, Hong Kong

Morgan Stanley Asia Limited


46/F, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong

ICBC International Securities Limited


37/F, ICBC Tower
3 Garden Road
Hong Kong

BOCI Asia Limited


26th Floor, Bank of China Tower
1 Garden Road
Hong Kong

ABCI Securities Company Limited


10/F, Agricultural Bank of China Tower
50 Connaught Road
Central
Hong Kong

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HOW TO APPLY FOR HONG KONG OFFER SHARES

Head & Shoulders Securities Limited


Room 2511, 25/F, Cosco Tower
183 Queen’s Road Central
Hong Kong

Futu Securities International (Hong Kong) Limited


11/F Bangkok Bank Building
14-20 Bonham Strand West
Sheung Wan, Hong Kong

Essence International Securities (Hong Kong) Limited


39/F., One Exchange Square, Central, Hong Kong

(ii) any of the following branches of the receiving bank:

Bank of China (Hong Kong) Limited

District Branch Name Address

Hong Kong Island . . . . Bank of China Tower 3/F, 1 Garden Road


Branch
Gilman Street Branch 136 Des Voeux Road Central
Sheung Wan Branch Shop 1-4, G/F, Tung Hip
Commercial Building, 244-248 Des
Voeux Road Central
Wan Chai (Wu Chung 213 Queen’s Road East, Wan Chai
House) Branch
Causeway Bay Branch 505 Hennessy Road, Causeway Bay,
Hong Kong
Johnston Road Branch 152-158 Johnston Road, Wan Chai
Chai Wan Branch Block B, Walton Estate, 341-343
Chai Wan Road, Chai Wan
Kowloon . . . . . . . . . . . . Shanghai Street (Mong 611-617 Shanghai Street, Mong Kok
Kok) Branch
Tsim Sha Tsui Branch
24-28 Carnarvon Road, Tsim Sha
Tsui, Kowloon
Whampoa Garden Shop G8B, Site 1, Whampoa
Branch Garden, Hung Hom
Mei Foo Mount Sterling Shop N47-49 Mount Sterling Mall,
Mall Branch Mei Foo Sun Chuen
194 Cheung Sha Wan 194-196 Cheung Sha Wan Road,
Road Branch Sham Shui Po, Kowloon
East Point City Branch Shop 101, East Point City, Tseung
Kwan O

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HOW TO APPLY FOR HONG KONG OFFER SHARES

District Branch Name Address

New Territories. . . . . . . Tuen Mun San Hui G13-G14 Eldo Court, Heung Sze
Branch Wui Road, Tuen Mun
Ma On Shan Plaza Shop 2103, Level 2, Ma On Shan
Branch Plaza, Sai Sha Road, Ma On Shan
Fo Tan Branch No 2, 1/F Shatin Galleria, 18-24
Shan Mei Street, Fo Tan

You can collect a YELLOW Application Form and a prospectus during normal business hours
from 9:00 a.m. on Monday, September 18, 2017 until 12:00 noon on Thursday, September 21, 2017
from the Depository Counter of HKSCC at 1/F, One & Two Exchange Square, 8 Connaught Place,
Central, Hong Kong or from your stockbroker.

Time for Lodging Application Forms

Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s
cashier order attached and marked payable to “BANK OF CHINA (HONG KONG) NOMINEES
LIMITED — ZHONGAN ONLINE P & C INSURANCE PUBLIC OFFER” for the payment, should be
deposited in the special collection boxes provided at any of the branches of the receiving bank listed
above, at the following times:

• Monday, September 18, 2017 — 9:00 a.m. to 5:00 p.m.

• Tuesday, September 19, 2017 — 9:00 a.m. to 5:00 p.m.

• Wednesday, September 20, 2017 — 9:00 a.m. to 5:00 p.m.

• Thursday, September 21, 2017 — 9:00 a.m. to 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, September 21,
2017, the last application day or such later time as described in “Effect of Bad Weather on the Opening
of the Application Lists” in this section.

4. TERMS AND CONDITIONS OF AN APPLICATION

Follow the detailed instructions in the Application Form carefully; otherwise, your application
may be rejected.

By submitting an Application Form or applying through the HK eIPO White Form service,
among other things, you:

(i) undertake to execute all relevant documents and instruct and authorize our Company and/or
the Joint Global Coordinators (or their agents or nominees), as agents of our Company, to
execute any documents for you and to do on your behalf all things necessary to register any
Hong Kong Offer Shares allocated to you in your name or in the name of HKSCC Nominees
as required by the Articles of Association;

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HOW TO APPLY FOR HONG KONG OFFER SHARES

(ii) agree to comply with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and the Articles of Association;

(iii) confirm that you have read the terms and conditions and application procedures set out in
this prospectus and in the Application Form and agree to be bound by them;

(iv) confirm that you have received and read this prospectus and have only relied on the
information and representations contained in this prospectus in making your application
and will not rely on any other information or representations except those in any
supplement to this prospectus;

(v) confirm that you are aware of the restrictions on the Global Offering in this prospectus;

(vi) agree that none of our Company, the Joint Global Coordinators, the Joint Sponsors, the
Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors,
officers, employees, partners, agents, advisors and any other parties involved in the Global
Offering is or will be liable for any information and representations not in this prospectus
(and any supplement to it);

(vii) undertake and confirm that you or the person(s) for whose benefit you have made the
application have not applied for or taken up, or indicated an interest for, and will not apply
for or take up, or indicate an interest for, any International Offer Shares under the
International Offering nor participated in the International Offering;

(viii) agree to disclose to our Company, our H Share Registrar, the receiving bank, the Joint
Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers,
the Underwriters and/or their respective advisors and agents any personal data which they
may require about you and the person(s) for whose benefit you have made the application;

(ix) if the laws of any place outside Hong Kong apply to your application, agree and warrant
that you have complied with all such laws and none of our Company, the Joint Global
Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers and the
Underwriters nor any of their respective officers or advisors will breach any law outside
Hong Kong as a result of the acceptance of your offer to purchase, or any action arising
from your rights and obligations under the terms and conditions contained in this
prospectus and the Application Form;

(x) agree that once your application has been accepted, you may not rescind it because of an
innocent misrepresentation;

(xi) agree that your application will be governed by the laws of Hong Kong;

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HOW TO APPLY FOR HONG KONG OFFER SHARES

(xii) represent, warrant and undertake that (i) you understand that the Hong Kong Offer Shares
have not been and will not be registered under the U.S. Securities Act; and (ii) you and any
person for whose benefit you are applying for the Hong Kong Offer Shares are outside the
United States (as defined in Regulation S) or are a person described in paragraph (h)(3) of
Rule 902 of Regulation S;

(xiii) warrant that the information you have provided is true and accurate;

(xiv) agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated to
you under the application;

(xv) authorize our Company to place your name(s) or the name of the HKSCC Nominees, on our
Company’s register of members as the holder(s) of any Hong Kong Offer Shares allocated
to you, and our Company and/or its agents to send any share certificate(s) and/or any
e-Auto Refund payment instructions and/or any refund cheque(s) to you or the first-named
applicant for joint application by ordinary post at your own risk to the address stated on the
application, unless you have chosen to collect the share certificate(s) and/or refund
cheque(s) in person;

(xvi) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are applying;

(xvii) understand that our Company, the Joint Global Coordinators and the Joint Sponsors will
rely on your declarations and representations in deciding whether or not to make any
allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted for
making a false declaration;

(xviii) (if the application is made for your own benefit) warrant that no other application has been
or will be made for your benefit on a WHITE or YELLOW Application Form or by giving
electronic application instructions to HKSCC or to the HK eIPO White Form Service
Provider by you or by any one as your agent or by any other person; and

(xix) (if you are making the application as an agent for the benefit of another person) warrant that
(i) no other application has been or will be made by you as agent for or for the benefit of
that person or by that person or by any other person as agent for that person on a WHITE
or YELLOW Application Form or by giving electronic application instructions to HKSCC;
and (ii) you have due authority to sign the Application Form or give electronic application
instructions on behalf of that other person as their agent.

Additional Instructions for YELLOW Application Form

(xx) You may refer to the YELLOW Application Form for details.

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HOW TO APPLY FOR HONG KONG OFFER SHARES

5. APPLYING THROUGH HK EIPO WHITE FORM SERVICE

General

Individuals who meet the criteria in “Who can apply” section, may apply through the HK eIPO
White Form service for the Offer Shares to be allotted and registered in their own names through the
designated website at www.hkeipo.hk.

Detailed instructions for application through the HK eIPO White Form service are on the
designated website. If you do not follow the instructions, your application may be rejected and may
not be submitted to our Company. If you apply through the designated website, you authorize the HK
eIPO White Form Service Provider to apply on the terms and conditions in this prospectus, as
supplemented and amended by the terms and conditions of the HK eIPO White Form service.

Time for Submitting Applications under the HK eIPO White Form

You may submit your application to the HK eIPO White Form Service Provider at
www.hkeipo.hk (24 hours daily, except on the last application day) from 9:00 a.m. on Monday,
September 18, 2017 until 11:30 a.m. on Thursday, September 21, 2017 and the latest time for
completing full payment of application monies in respect of such applications will be 12:00 noon on
Thursday, September 21, 2017 or such later time under the “Effects of Bad Weather on the Opening
of the Application Lists” in this section.

No Multiple Applications

If you apply by means of HK eIPO White Form, once you complete payment in respect of any
electronic application instruction given by you or for your benefit through the HK eIPO White Form
service to make an application for Hong Kong Offer Shares, an actual application shall be deemed to
have been made. For the avoidance of doubt, giving an electronic application instruction under HK
eIPO White Form more than once and obtaining different payment reference numbers without
effecting full payment in respect of a particular reference number will not constitute an actual
application.

If you are suspected of submitting more than one application through the HK eIPO White Form
service or by any other means, all of your applications are liable to be rejected.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, our Company and all other parties involved in the preparation of this
prospectus acknowledge that each applicant who gives or causes to give electronic application
instructions is a person who may be entitled to compensation under Section 40 of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance).

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HOW TO APPLY FOR HONG KONG OFFER SHARES

6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC


VIA CCASS

General

CCASS Participants may give electronic application instructions to apply for the Hong Kong
Offer Shares and to arrange payment of the money due on application and payment of refunds under
their participant agreements with HKSCC and the General Rules of CCASS and the CCASS
Operational Procedures.

If you are a CCASS Investor Participant, you may give these electronic application instructions
through the CCASS Phone System by calling +852 2979 7888 or through the CCASS Internet System
(https://ip.ccass.com) (using the procedures in HKSCC’s “An Operating Guide for Investor
Participants” in effect from time to time).

HKSCC can also input electronic application instructions for you if you go to:

Hong Kong Securities Clearing Company Limited


Customer Service Center
1/F, One & Two Exchange Square,
8 Connaught Place, Central
Hong Kong

and complete an input request form.

You can also collect a prospectus from this address.

If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is
a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application
instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf.

You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details
of your application to our Company, the Joint Global Coordinators, the Joint Sponsors and our H Share
Registrar.

GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS

Where you have given electronic application instructions to apply for the Hong Kong Offer
Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf:

(i) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach
of the terms and conditions of the WHITE Application Form or this prospectus;

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HOW TO APPLY FOR HONG KONG OFFER SHARES

(ii) HKSCC Nominees will do the following things on your behalf:

• agree that the Hong Kong Offer Shares to be allotted shall be issued in the name of
HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS
Participant’s stock account on your behalf or your CCASS Investor Participant’s stock
account;

• agree to accept the Hong Kong Offer Shares applied for or any lesser number
allocated;

• undertake and confirm that you have not applied for or taken up, will not apply for or
take up, or indicate an interest for, any Offer Shares under the International Offering;

• (if the electronic application instructions are given for your benefit) declare that only
one set of electronic application instructions has been given for your benefit;

• (if you are an agent for another person) declare that you have only given one set of
electronic application instructions for the other person’s benefit and are duly
authorized to give those instructions as their agent;

• confirm that you understand that our Company, the Directors, the Joint Global
Coordinators and the Joint Sponsors will rely on your declarations and representations
in deciding whether or not to make any allotment of any of the Hong Kong Offer
Shares to you and that you may be prosecuted if you make a false declaration;

• authorize our Company to place HKSCC Nominees’ name on our Company’s register
of members as the holder of the Hong Kong Offer Shares allocated to you and to send
share certificate(s) and/or refund monies under the arrangements separately agreed
between us and HKSCC;

• confirm that you have read the terms and conditions and application procedures set out
in this prospectus and agree to be bound by them;

• confirm that you have received and/or read a copy of this prospectus and have relied
only on the information and representations in this prospectus in causing the
application to be made, save as set out in any supplement to this prospectus;

• agree that none of our Company, the Joint Global Coordinators, the Joint Sponsors, the
Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective
directors, officers, employees, partners, agents, advisors and any other parties
involved in the Global Offering, is or will be liable for any information and
representations not contained in this prospectus (and any supplement to it);

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HOW TO APPLY FOR HONG KONG OFFER SHARES

• agree to disclose your personal data to our Company, our H Share Registrar, the
receiving bank, the Joint Global Coordinators, the Joint Sponsors, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters and/or its respective advisors
and agents;

• agree without prejudice to any other rights which you may have that once HKSCC
Nominees’ application has been accepted, it cannot be rescinded for innocent
misrepresentation;

• agree that any application made by HKSCC Nominees on your behalf is irrevocable
before the fifth day after the time of the opening of the application lists (excluding any
day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to
take effect as a collateral contract with us and to become binding when you give the
instructions and such collateral contract to be in consideration of our Company
agreeing that it will not offer any Hong Kong Offer Shares to any person before the
fifth day after the time of the opening of the application lists (excluding any day
which is Saturday, Sunday or public holiday in Hong Kong), except by means of one
of the procedures referred to in this prospectus. However, HKSCC Nominees may
revoke the application before the fifth day after the time of the opening of the
application lists (excluding for this purpose any day which is a Saturday, Sunday or
public holiday in Hong Kong) if a person responsible for this prospectus under Section
40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a
public notice under that section which excludes or limits that person’s responsibility
for this prospectus;

• agree that once HKSCC Nominees’ application is accepted, neither that application
nor your electronic application instructions can be revoked, and that acceptance of
that application will be evidenced by our Company’s announcement of the Hong Kong
Public Offering results;

• agree to the arrangements, undertakings and warranties under the participant


agreement between you and HKSCC, read with the General Rules of CCASS and the
CCASS Operational Procedures, for the giving electronic application instructions to
apply for Hong Kong Offer Shares;

• agree with our Company, for itself and for the benefit of each Shareholder (and so that
our Company will be deemed by its acceptance in whole or in part of the application
by HKSCC Nominees to have agreed, for itself and on behalf of each of the
Shareholders, with each CCASS Participant giving electronic application instructions)
to observe and comply with the Company Law, the Special Regulations on Listing
Overseas and the Articles of Association of the Company;

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HOW TO APPLY FOR HONG KONG OFFER SHARES

• agree with the Company, for itself and for the benefit of each shareholder of the
Company and each director, supervisor, manager and other senior officer of the
Company (and so that the Company will be deemed by its acceptance in whole or in
part of this application to have agreed, for itself and on behalf of each shareholder of
the Company and each director, supervisor, manager and other senior officer of the
Company, with each CCASS Participant giving electronic application instructions):

(a) to refer all differences and claims arising from the Articles of Association of the
Company or any rights or obligations conferred or imposed by the Company Law
or other relevant laws and administrative regulations concerning the affairs of
the Company to arbitration in accordance with the Articles of Association of the
Company;

(b) that any award made in such arbitration shall be final and conclusive; and

(c) that the arbitration tribunal may conduct hearings in open sessions and publish
its award;

• agree with the Company (for the Company itself and for the benefit of each
shareholder of the Company) that H shares in the Company are freely transferable by
their holders;

• authorize the Company to enter into a contract on its behalf with each director and
officer of the Company whereby each such director and officer undertakes to observe
and comply with his obligations to shareholders stipulated in the Articles of
Association of the Company; and

• agree that your application, any acceptance of it and the resulting contract will be
governed by the Laws of Hong Kong.

EFFECT OF GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS

By giving electronic application instructions to HKSCC or instructing your broker or custodian


who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to
HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have
done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to our Company or
any other person in respect of the things mentioned below:

• instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the
relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf;

• instructed and authorized HKSCC to arrange payment of the Offer Price, brokerage, SFC
transaction levy and the Hong Kong Stock Exchange trading fee by debiting your
designated bank account and, in the case of a wholly or partially unsuccessful application,
refund of the application monies (including brokerage, SFC transaction levy and the Hong
Kong Stock Exchange trading fee) by crediting your designated bank account; and

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HOW TO APPLY FOR HONG KONG OFFER SHARES

• instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the
things stated in the WHITE Application Form and in this prospectus.

Minimum Purchase Amount and Permitted Numbers

You may give or cause your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions for a minimum of 100 Hong
Kong Offer Shares. Instructions for more than 100 Hong Kong Offer Shares must be in one of the
numbers set out in the table in the Application Forms. No application for any other number of Hong
Kong Offer Shares will be considered and any such application is liable to be rejected.

Time for Inputting Electronic Application Instructions

CCASS Clearing/Custodian Participants can input electronic application instructions at the


following times on the following dates:

• Monday, September 18, 2017 — 9:00 a.m. to 8:30 p.m. (1)

• Tuesday, September 19, 2017 — 8:00 a.m. to 8:30 p.m. (1)

• Wednesday, September 20, 2017 — 8:00 a.m. to 8:30 p.m. (1)

• Thursday, September 21, 2017 — 8:00 a.m. (1) to 12:00 noon

Note:

(1) These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS
Clearing/ Custodian Participants.

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on
Monday, September 18, 2017 until 12:00 noon on Thursday, September 21, 2017 (24 hours daily,
except on the last application day).

The latest time for inputting your electronic application instructions will be 12:00 noon on
Thursday, September 21, 2017, the last application day or such later time as described in “Effect of
Bad Weather on the Opening of the Application Lists” in this section.

No Multiple Applications

If you are suspected of having made multiple applications or if more than one application is made
for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be
automatically reduced by the number of Hong Kong Offer Shares for which you have given such
instructions and/or for which such instructions have been given for your benefit. Any electronic
application instructions to make an application for the Hong Kong Offer Shares given by you or for
your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering
whether multiple applications have been made.

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HOW TO APPLY FOR HONG KONG OFFER SHARES

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, our Company and all other parties involved in the preparation of this
prospectus acknowledge that each CCASS Participant who gives or causes to give electronic
application instructions is a person who may be entitled to compensation under Section 40 of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Personal Data

The section of the Application Form headed “Personal Data” applies to any personal data held
by our Company, the H Share Registrar, the receiving bank, the Joint Global Coordinators, the Joint
Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and any of their
respective advisors and agents about you in the same way as it applies to personal data about
applicants other than HKSCC Nominees.

7. WARNING FOR ELECTRONIC APPLICATIONS

The subscription of the Hong Kong Offer Shares by giving electronic application instructions to
HKSCC is only a facility provided to CCASS Participants. Similarly, the application for Hong Kong
Offer Shares through the HK eIPO White Form service is also only a facility provided by the HK
eIPO White Form Service Provider to public investors. Such facilities are subject to capacity
limitations and potential service interruptions and you are advised not to wait until the last application
day in making your electronic applications. Our Company, the Directors, the Joint Bookrunners, the
Joint Sponsors, the Joint Global Coordinators and the Underwriters take no responsibility for such
applications and provide no assurance that any CCASS Participant or person applying through the HK
eIPO White Form service will be allotted any Hong Kong Offer Shares.

To ensure that CCASS Investor Participants can give their electronic application instructions,
they are advised not to wait until the last minute to input their instructions to the systems. In the event
that CCASS Investor Participants have problems in the connection to CCASS Phone System/CCASS
Internet System for submission of electronic application instructions, they should either (i) submit a
WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Centre to complete
an input request form for electronic application instructions before 12:00 noon on Thursday,
September 21, 2017.

8. HOW MANY APPLICATIONS CAN YOU MAKE

Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees. If you
are a nominee, in the box on the Application Form marked “For nominees” you must include:

• an account number; or

• some other identification code,

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HOW TO APPLY FOR HONG KONG OFFER SHARES

for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner.
If you do not include this information, the application will be treated as being made for your benefit.

All of your applications will be rejected if more than one application on a WHITE or YELLOW
Application Form or by giving electronic application instructions to HKSCC or through HK eIPO
White Form service, is made for your benefit (including the part of the application made by HKSCC
Nominees acting on electronic application instructions). If an application is made by an unlisted
company and:

• the principal business of that company is dealing in securities; and

• you exercise statutory control over that company,

then the application will be treated as being for your benefit.

“Unlisted company” means a company with no equity securities listed on the Hong Kong Stock
Exchange.

“Statutory control” means you:

• control the composition of the board of directors of the company;

• control more than half of the voting power of the company; or

• hold more than half of the issued share capital of the company (not counting any part of it
which carries no right to participate beyond a specified amount in a distribution of either
profits or capital).

9. HOW MUCH ARE THE HONG KONG OFFER SHARES

The WHITE and YELLOW Application Forms have tables showing the exact amount payable
for Shares.

You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Hong Kong
Stock Exchange trading fee in full upon application for H Shares under the terms set out in the
Application Forms.

You may submit an application using a WHITE or YELLOW Application Form or through the
HK eIPO White Form service in respect of a minimum of 100 Hong Kong Offer Shares. Each
application or electronic application instruction in respect of more than 100 Hong Kong Offer Shares
must be in one of the numbers set out in the table in the Application Form, or as otherwise specified
on the designated website at www.hkeipo.hk.

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HOW TO APPLY FOR HONG KONG OFFER SHARES

If your application is successful, brokerage will be paid to the Exchange Participants, and the
SFC transaction levy and the Hong Kong Stock Exchange trading fee are paid to the Hong Kong Stock
Exchange (in the case of the SFC transaction levy, collected by the Hong Kong Stock Exchange on
behalf of the SFC).

For further details on the Offer Price, see “Structure of the Global Offering — Pricing of the
Global Offering.”

10. EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS

The application lists will not open if there is:

• a tropical cyclone warning signal number 8 or above; or

• a “black” rainstorm warning,

in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, September 21,
2017. Instead they will open between 11:45 a.m. and 12:00 noon on the next Business Day which does
not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00
noon.

If the application lists do not open and close on Thursday, September 21, 2017 or if there is a
tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in
Hong Kong that may affect the dates mentioned in “Expected Timetable,” an announcement will be
made in such event.

11. PUBLICATION OF RESULTS

Our Company expects to announce the level of indication of interest in the International
Offering, the level of applications in the Hong Kong Public Offering and the basis of allocation of the
Hong Kong Offer Shares on Wednesday, September 27, 2017 in South China Morning Post (in English)
and Hong Kong Economic Times (in Chinese) on our Company’s website at
(https://www.zhongan.com/) and the website of the Hong Kong Stock Exchange at
www.hkexnews.hk.

The results of allocations and the Hong Kong identity card/passport/Hong Kong business
registration numbers of successful applicants under the Hong Kong Public Offering will be available
at the times and date and in the manner specified below:

• in the announcement to be posted on our Company’s website at


(https://www.zhongan.com/) and the Hong Kong Stock Exchange’s website at
www.hkexnews.hk by no later than 8:00 a.m. on Wednesday, September 27, 2017;

• from the designated results of allocations website at www.tricor.com.hk/ipo/result with a


“search by ID” function on a 24-hour basis from 8:00 a.m. on Wednesday, September 27,
2017 to 12:00 midnight on Wednesday, October 4, 2017;

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HOW TO APPLY FOR HONG KONG OFFER SHARES

• by telephone enquiry line by calling +852 3691 8488 between 9:00 a.m. and 6:00 p.m. from
Wednesday, September 27, 2017 to Tuesday, October 3, 2017 (excluding Saturday, Sunday
and public holiday);

• in the special allocation results booklets which will be available for inspection during
opening hours from Wednesday, September 27, 2017 to Friday, September 29, 2017 at the
designated receiving bank branches.

If our Company accepts your offer to purchase (in whole or in part), which it may do by
announcing the basis of allocations and/or making available the results of allocations publicly, there
will be a binding contract under which you will be required to purchase the Hong Kong Offer Shares
if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise
terminated. Further details are contained in “Structure of the Global Offering.”

You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at
any time after acceptance of your application. This does not affect any other right you may have.

12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED OFFER SHARES

You should note the following situations in which the Hong Kong Offer Shares will not be
allotted to you:

(i) If your application is revoked:

By completing and submitting an Application Form or giving electronic application


instructions to HKSCC or to HK eIPO White Form Service Provider, you agree that your
application or the application made by HKSCC Nominees on your behalf cannot be revoked on
or before the fifth day after the time of the opening of the application lists (excluding for this
purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement
will take effect as a collateral contract with our Company.

Your application or the application made by HKSCC Nominees on your behalf may only be
revoked on or before such fifth day if a person responsible for this prospectus under Section 40
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section
342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public
notice under that section which excludes or limits that person’s responsibility for this prospectus.

If any supplement to this prospectus is issued, applicants who have already submitted an
application will be notified that they are required to confirm their applications. If applicants have
been so notified but have not confirmed their applications in accordance with the procedure to
be notified, all unconfirmed applications will be deemed revoked.

If your application or the application made by HKSCC Nominees on your behalf has been
accepted, it cannot be revoked. For this purpose, acceptance of applications which are not

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HOW TO APPLY FOR HONG KONG OFFER SHARES

rejected will be constituted by notification in the press of the results of allocation, and where
such basis of allocation is subject to certain conditions or provides for allocation by ballot, such
acceptance will be subject to the satisfaction of such conditions or results of the ballot
respectively.

(ii) If our Company or its agents exercise their discretion to reject your application:

Our Company, the Joint Global Coordinators, the Joint Sponsors, the HK eIPO White
Form Service Provider and their respective agents and nominees have full discretion to reject or
accept any application, or to accept only part of any application, without giving any reasons.

(iii) If the allotment of Hong Kong Offer Shares is void:

The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the Hong
Kong Stock Exchange does not grant permission to list the H Shares either:

• within three weeks from the closing date of the application lists; or

• within a longer period of up to six weeks if the Listing Committee notifies our
Company of that longer period within three weeks of the closing date of the
application lists.

(iv) If:

• you make multiple applications or suspected multiple applications;

• you or the person for whose benefit you are applying have applied for or taken up, or
indicated an interest for, or have been or will be placed or allocated (including
conditionally and/or provisionally) Hong Kong Offer Shares and International Offer
Shares;

• your Application Form is not completed in accordance with the stated instructions;

• your electronic application instructions through the HK eIPO White Form service are
not completed in accordance with the instructions, terms and conditions on the
designated website;

• your payment is not made correctly or the cheque or banker’s cashier order paid by
you is dishonored upon its first presentation;

• the Underwriting Agreements do not become unconditional or are terminated;

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HOW TO APPLY FOR HONG KONG OFFER SHARES

• our Company or the Joint Global Coordinators and the Joint Sponsors believe that by
accepting your application, it or they would violate applicable securities or other laws,
rules or regulations; or

• your application is for more than 50% of the Hong Kong Offer Shares initially offered
under the Hong Kong Public Offering.

13. REFUND OF APPLICATION MONIES

If an application is rejected, not accepted or accepted in part only, or if the conditions of the
Hong Kong Public Offering are not fulfilled in accordance with “Structure of the Global Offering —
Conditions of the Global Offering” in this prospectus or if any application is revoked, the application
monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy
and the Hong Kong Stock Exchange trading fee, will be refunded, without interest or the cheque or
banker’s cashier order will not be cleared.

Any refund of your application monies will be made on Wednesday, September 27, 2017.

14. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES

You will receive one share certificate for all Hong Kong Offer Shares allotted to you under the
Hong Kong Public Offering (except pursuant to applications made on YELLOW Application Forms
or by electronic application instructions to HKSCC via CCASS where the share certificates will be
deposited into CCASS as described below).

No temporary document of title will be issued in respect of the H Shares. No receipt will be
issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject
to personal collection as mentioned below, the following will be sent to you (or, in the case of joint
applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified
on the Application Form:

• share certificate(s) for all the Hong Kong Offer Shares allotted to you (for YELLOW
Application Forms, share certificates will be deposited into CCASS as described below);
and

• refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in the case
of joint applicants, the first-named applicant) for (i) all or the surplus application monies
for the Hong Kong Offer Shares, wholly or partially unsuccessfully applied for; and for (ii)
the difference between the Offer Price and the maximum Offer Price for the Offer Share
paid on application in the event that the Offer Price is less than the maximum Offer Price
(including brokerage, SFC transaction levy and the Stock Exchange trading fee without
interest). Part of the Hong Kong identity card number/passport number, provided by you or
the first-named applicant (if you are joint applicants), may be printed on your refund
cheque, if any. Your banker may require verification of your Hong Kong identity card
number/passport number before encashment of your refund cheque(s). Inaccurate
completion of your Hong Kong identity card number/passport number may invalidate or
delay encashment of your refund cheque(s).

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HOW TO APPLY FOR HONG KONG OFFER SHARES

Subject to arrangement on dispatch/collection of share certificates and refund monies as


mentioned below, any refund cheques and share certificates are expected to be posted on or around
Wednesday, September 27, 2017. The right is reserved to retain any share certificate(s) and any
surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

Share certificates will only become valid at 8:00 a.m. on Thursday, September 28, 2017 provided
that the Global Offering has become unconditional and the right of termination described in the
“Underwriting” section in this prospectus has not been exercised. Investors who trade shares prior to
the receipt of share certificates or the share certificates becoming valid do so at their own risk.

Personal Collection

(i) If you apply using a WHITE Application Form

If you apply for 1,000,000 or more Hong Kong Offer Shares and have provided all information
required by your Application Form, you may collect your refund cheque(s) and/or share certificate(s)
from our H Share Registrar at Tricor Investor Services Limited, Level 22, Hopewell Centre, 183
Queen’s Road East, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Wednesday, September 27, 2017 or
such other date as notified by us in the newspapers.

If you are an individual who is eligible for personal collection, you must not authorize any other
person to collect for you. If you are a corporate applicant which is eligible for personal collection,
your authorized representative must bear a letter of authorization from your corporation stamped with
your corporation’s chop. Both individuals and authorized representatives must produce, at the time of
collection, evidence of identity acceptable to the H Share Registrar.

If you do not collect your refund cheque(s) and/or share certificate(s) personally within the time
specified for collection, they will be despatched promptly to the address specified in your Application
Form by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) and/or share
certificate(s) will be sent to the address on the relevant Application Form on or before Wednesday,
September 27, 2017, by ordinary post and at your own risk.

(ii) If you apply using a YELLOW Application Form

If you apply for 1,000,000 Hong Kong Offer Shares or more, please follow the same instructions
as described above. If you have applied for less than 1,000,000 Hong Kong Offer Shares, your refund
cheque(s) will be sent to the address on the relevant Application Form on Wednesday, September 27,
2017, by ordinary post and at your own risk.

— 407 —
HOW TO APPLY FOR HONG KONG OFFER SHARES

If you apply by using a YELLOW Application Form and your application is wholly or partially
successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited
into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your
Application Form on Wednesday, September 27, 2017, or upon contingency, on any other date
determined by HKSCC or HKSCC Nominees.

• If you apply through a designated CCASS participant (other than a CCASS investor
participant)

For Hong Kong Offer Shares credited to your designated CCASS participant’s stock account
(other than CCASS Investor Participant), you can check the number of Hong Kong Offer Shares
allotted to you with that CCASS participant.

• If you are applying as a CCASS investor participant

Our Company will publish the results of CCASS Investor Participants’ applications together with
the results of the Hong Kong Public Offering in the manner described in “Publication of Results”
above. You should check the announcement published by our Company and report any discrepancies
to HKSCC before 5:00 p.m. on Wednesday, September 27, 2017 or any other date as determined by
HKSCC or HKSCC Nominees.

Immediately after the credit of the Hong Kong Offer Shares to your stock account, you can check
your new account balance via the CCASS Phone System and CCASS Internet System.

(iii) If you apply through the HK eIPO White Form service

If you apply for 1,000,000 Hong Kong Offer Shares or more and your application is wholly or
partially successful, you may collect your share certificate(s) from H Share Registrar at Tricor
Investor Services Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, from 9:00
a.m. to 1:00 p.m. on Wednesday, September 27, 2017, or such other date as notified by our Company
in the newspapers as the date of despatch/collection of share certificates/e-Auto Refund payment
instructions/refund cheques.

If you do not collect your share certificate(s) personally within the time specified for collection,
they will be sent to the address specified in your application instructions by ordinary post at your own
risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your share certificate(s) (where
applicable) will be sent to the address specified in your application instructions on Wednesday,
September 27, 2017 by ordinary post at your own risk.

— 408 —
HOW TO APPLY FOR HONG KONG OFFER SHARES

If you apply and pay the application monies from a single bank account, any refund monies will
be despatched to that bank account in the form of e-Auto Refund payment instructions. If you apply
and pay the application monies from multiple bank accounts, any refund monies will be despatched
to the address as specified in your application instructions in the form of refund cheque(s) by ordinary
post at your own risk.

(iv) If you apply via Electronic Application Instructions to HKSCC

Allocation of Hong Kong Offer Shares

For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated
as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each
person for whose benefit instructions are given will be treated as an applicant.

Deposit of Share Certificates into CCASS and Refund of Application Monies

• If your application is wholly or partially successful, your share certificate(s) will be issued in the
name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS
Participant’s stock account or your CCASS Investor Participant stock account on Wednesday,
September 27, 2017, or, on any other date determined by HKSCC or HKSCC Nominees.

• Our Company expects to publish the application results of CCASS Participants (and where the
CCASS Participant is a broker or custodian, our Company will include information relating to
the relevant beneficial owner), your Hong Kong identity card number/passport number or other
identification code (Hong Kong business registration number for corporations) and the basis of
allotment of the Hong Kong Public Offering in the manner specified in “Publication of Results”
above on Wednesday, September 27, 2017. You should check the announcement published by our
Company and report any discrepancies to HKSCC before 5:00 p.m. on Wednesday, September 27,
2017 or such other date as determined by HKSCC or HKSCC Nominees.

• If you have instructed your broker or custodian to give electronic application instructions on
your behalf, you can also check the number of Hong Kong Offer Shares allotted to you and the
amount of refund monies (if any) payable to you with that broker or custodian.

• If you have applied as a CCASS Investor Participant, you can also check the number of Hong
Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you via
the CCASS Phone System and the CCASS Internet System (under the procedures contained in
HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on
Wednesday, September 27, 2017. Immediately following the credit of the Hong Kong Offer
Shares to your stock account and the credit of refund monies to your bank account, HKSCC will
also make available to you an activity statement showing the number of Hong Kong Offer Shares
credited to your CCASS Investor Participant stock account and the amount of refund monies (if
any) credited to your designated bank account.

— 409 —
HOW TO APPLY FOR HONG KONG OFFER SHARES

• Refund of your application monies (if any) in respect of wholly and partially unsuccessful
applications and/or difference between the Offer Price and the maximum Offer Price initially
paid on application (including brokerage, SFC transaction levy and the Hong Kong Stock
Exchange trading fee but without interest) will be credited to your designated bank account or
the designated bank account of your broker or custodian on Wednesday, September 27, 2017.

15. ADMISSION OF THE H SHARES INTO CCASS

If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the H Shares
and we comply with the stock admission requirements of HKSCC, the H Shares will be accepted as
eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date
of commencement of dealings in the H Shares or any other date HKSCC chooses. Settlement of
transactions between Exchange Participants (as defined in the Hong Kong Listing Rules) is required
to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational
Procedures in effect from time to time.

Investors should seek the advice of their stockbroker or other professional advisor for details of
the settlement arrangement as such arrangements may affect their rights and interests.

All necessary arrangements have been made enabling the H Shares to be admitted into CCASS.

— 410 —
APPENDIX I ACCOUNTANT’S REPORT

The following is the text of a report set out on pages I-1 to I-3, received from the Company’s
reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the
purpose of incorporation in this prospectus. It is prepared and addressed to the directors and to
the Joint Sponsors pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical
Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified
Public Accountants.

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE


DIRECTORS OF ZHONGAN ONLINE P & C INSURANCE CO., LTD., J.P. MORGAN
SECURITIES (FAR EAST) LIMITED, CREDIT SUISSE (HONG KONG) LIMITED, UBS
SECURITIES HONG KONG LIMITED AND CMB INTERNATIONAL CAPITAL LIMITED

Introduction

We report on the historical financial information of ZhongAn Online P & C Insurance Co., Ltd.
(the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-97, which
comprises the consolidated statements of financial position as at 31 December 2014, 2015, 2016, and
31 March 2017, the Company’s statements of financial position as at 31 December 2014, 2015, 2016
and 31 March 2017, and the consolidated statements of comprehensive income, the consolidated
statements of changes in equity and the consolidated statements of cash flows for each of the periods
then ended (the “Relevant Periods”) and a summary of significant accounting policies and other
explanatory information (together, the “Historical Financial Information”). The Historical Financial
Information set out on pages I-4 to I-97 forms an integral part of this report, which has been prepared
for inclusion in the prospectus of the Company dated 18 September 2017 (the “Prospectus”) in
connection with the initial listing of H shares of the Company on the Main Board of The Stock
Exchange of Hong Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out in Note
2.1 to the Historical Financial Information, and for such internal control as the directors determine is
necessary to enable the preparation of Historical Financial Information that is free from material
misstatement, whether due to fraud or error.

— I-1 —
APPENDIX I ACCOUNTANT’S REPORT

Reporting accountant’s responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report
our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
This standard requires that we comply with ethical standards and plan and perform our work to obtain
reasonable assurance about whether the Historical Financial Information is free from material
misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures
in the Historical Financial Information. The procedures selected depend on the reporting accountant’s
judgement, including the assessment of risks of material misstatement of the Historical Financial
Information, whether due to fraud or error. In making those risk assessments, the reporting accountant
considers internal control relevant to the entity’s preparation of Historical Financial Information that
gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to the
Historical Financial Information in order to design procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Our work also included evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Opinion

In our opinion the Historical Financial Information gives, for the purposes of the accountant’s
report, a true and fair view of the financial position of the Company as at 31 December 2014, 2015,
2016 and 31 March 2017, the consolidated financial position of the Group as at 31 December 2014,
2015, 2016 and 31 March 2017, and of its consolidated financial performance and its consolidated
cash flows for the Relevant Periods in accordance with the basis of preparation set out in Note 2.1 to
the Historical Financial Information.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Group which
comprises the consolidated statements of comprehensive income, changes in equity and cash flows for
the three months ended 31 March 2016 and other explanatory information (the “Stub Period
Comparative Financial Information”). The directors of the Company are responsible for the
preparation of the Stub Period Comparative Financial Information in accordance with the basis of
preparation set out in Notes 2.1 to the Historical Financial Information. Our responsibility is to
express a conclusion on the Stub Period Comparative Financial Information based on our review. We
conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review
of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the
HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and

— I-2 —
APPENDIX I ACCOUNTANT’S REPORT

accounting matters, and applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based
on our review, nothing has come to our attention that causes us to believe that the Stub Period
Comparative Financial Information, for the purposes of the accountant’s report, is not prepared, in all
material respects, in accordance with the basis of preparation set out in Notes 2.1 to the Historical
Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up and
Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information no adjustments to the Underlying Financial


Statements as defined on page I-4 have been made.

Dividends

No dividends have been paid by ZhongAn Online P & C Insurance Co., Ltd. in respect of the
Relevant Periods.

PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
18 September 2017

— I-3 —
APPENDIX I ACCOUNTANT’S REPORT

I HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this
accountant’s report. The financial statements of the Group for the Relevant Periods, on which the
Historical Financial Information is based, were audited by PricewaterhouseCoopers Zhong Tian LLP
(普華永道中天會計師事務所(特殊普通合夥)) in accordance with Hong Kong Standards on Auditing
issued by the HKICPA (“Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi and all values are rounded to the
nearest thousand (RMB’000) except when otherwise indicated.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended


Year ended 31 December 31 March
Section II 2014 2015 2016 2016 2017
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Gross written premiums . . . . 6(a) 794,097 2,283,042 3,408,048 604,401 1,030,363
Less: Premiums ceded to
reinsurers . . . . . . . . . . . . . 6(b) (7,265) (10,443) (39,632) (3,516) (35,954)
Net written premiums. . . . . . 6 786,832 2,272,599 3,368,416 600,885 994,409
Less: Net change in
unearned premium
reserves . . . . . . . . . . . . . . 6 (74,647) (351,105) (143,004) (31,706) (107,632)
Net premiums earned . . . . . 6 712,185 1,921,494 3,225,412 569,179 886,777
Net investment income . . . . . 7 80,062 520,684 98,624 (167,093) 95,552
Net fair value gains through
profit or loss . . . . . . . . . . 8 9,914 40,611 41,843 (52,435) (96,555)
Other operating income . . . . 9 15,376 26,556 46,841 204 10,120
Other income . . . . . . . . . . . 105,352 587,851 187,308 (219,324) 9,117
Total income . . . . . . . . . . . . 817,537 2,509,345 3,412,720 349,855 895,894
Net claims incurred . . . . . .. 10 (522,903) (1,316,269) (1,355,293) (265,555) (396,713)
Handling charges and
commissions . . . . . . . . . .. 11 (16,154) (100,641) (287,109) (44,600) (115,465)
Finance costs . . . . . . . . . . .. (5,702) (3,078) (203) (157) (445)
Other operating and
administrative expenses .. 12 (236,194) (1,029,764) (1,757,100) (333,235) (605,975)
Total benefits, claims and
expenses. . . . . . . . . . . . . . (780,953) (2,449,752) (3,399,705) (643,547) (1,118,598)
Operating profit/(loss)
before income tax . . . . . . 36,584 59,593 13,015 (293,692) (222,704)
Income tax expense . . . . . . . 16 397 (15,336) (3,643) 38,307 20,608
Net profit/(loss) for the
year/period . . . . . . . . . . . 36,981 44,257 9,372 (255,385) (202,096)

— I-4 —
APPENDIX I ACCOUNTANT’S REPORT

Three months ended


Year ended 31 December 31 March
Section II 2014 2015 2016 2016 2017
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Other comprehensive
income/(loss) to be
reclassified to profit or
loss in subsequent
periods:
- Available-for-sale
financial assets . . . . . . . 18 4,099 69,055 (55,350) (3,048) (11,727)
Other comprehensive
income/(loss) for the
year/period . . . . . . . . . . . . 18 4,099 69,055 (55,350) (3,048) (11,727)
Total comprehensive
income/(loss) for the
year/period . . . . . . . . . . . 41,080 113,312 (45,978) (258,433) (213,823)
Earnings/(loss) per share .
- Basic (RMB yuan) . . . . . 17 0.04 0.04 0.01 (0.21) (0.16)
- Diluted (RMB yuan) . . . 17 0.04 0.04 0.01 (0.21) (0.16)

— I-5 —
APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At
Section II At 31 December 31 March

Notes 2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


ASSETS
Cash and cash equivalents . . . . . . . . . . . 19 141,696 1,374,897 1,153,244 1,054,646
Financial assets at fair value through
profit or loss . . . . . . . . . . . . . . . . . . . 20 121,486 1,321,398 1,599,230 1,694,232
Securities purchased under agreements
to resell . . . . . . . . . . . . . . . . . . . . . . . 21 50,000 — 302,300 800
Interest receivables . . . . . . . . . . . . . . . . 22 23,455 98,294 136,841 87,243
Premiums receivables . . . . . . . . . . . . . . . 23 21,621 112,382 174,281 173,913
Reinsurance debtors . . . . . . . . . . . . . . . . 24 534 14,757 10,838 14,468
Reinsurers’ share of insurance contract
liabilities . . . . . . . . . . . . . . . . . . . . . . 36 5,008 7,855 24,104 40,509
Available-for-sale financial assets . . . . . 25 368,130 3,556,804 3,670,260 3,163,042
Investments classified as loans and
receivables . . . . . . . . . . . . . . . . . . . . . 26 408,299 1,207,896 1,707,648 1,716,451
Restricted statutory deposits. . . . . . . . . . 27 200,000 248,125 248,125 248,125
Property and equipment . . . . . . . . . . . . . 28 10,668 14,608 53,651 55,622
Intangible assets . . . . . . . . . . . . . . . . . . 29 11,735 40,330 147,953 173,835
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . — — 1,047 1,047
Other assets . . . . . . . . . . . . . . . . . . . . . . 31 6,829 71,797 102,701 132,172
Total assets . . . . . . . . . . . . . . . . . . . . . . 1,369,461 8,069,143 9,332,223 8,556,105
EQUITY AND LIABILITIES
Equity
Share capital . . . . . . . . . . . . . . . . . . . . . 32 1,000,000 1,240,625 1,240,625 1,240,625
Reserves . . . . . . . . . . . . . . . . . . . . . . . . 33 13,493 5,606,367 5,557,649 5,547,013
Retained earnings/(Accumulated losses) . 7,069 51,326 60,698 (141,398)
Total equity . . . . . . . . . . . . . . . . . . . . . 1,020,562 6,898,318 6,858,972 6,646,240
Liabilities
Securities sold under agreements to
repurchase . . . . . . . . . . . . . . . ... . . . 35 140,000 1,600 282,674 2,300
Premiums received in advance . . ... . . . 1,061 16,519 61,608 30,681
Reinsurance payables . . . . . . . . . ... . . . 1,708 5,545 33,999 68,116
Policyholders’ deposits. . . . . . . . ... . . . — 12 211 203
Insurance contract liabilities . . . ... . . . 36 123,005 616,231 797,305 968,662
Investment contract liabilities . . ... . . . 37 — 1,562 573,069 137,196
Deferred tax liabilities . . . . . . . . ... . . . 30 970 39,324 24,517 —
Other liabilities . . . . . . . . . . . . . ... . . . 38 82,155 490,032 699,868 702,707
Total liabilities . . . . . . . . . . . . . . . . . . . 348,899 1,170,825 2,473,251 1,909,865

Total equity and liabilities . . . . . . . . . . 1,369,461 8,069,143 9,332,223 8,556,105

— I-6 —
APPENDIX I ACCOUNTANT’S REPORT

STATEMENT OF FINANCIAL POSITION OF THE COMPANY

At
Section II At 31 December 31 March

Notes 2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


ASSETS
Cash and cash equivalents . . . . . . . . . . . 19 129,852 703,624 759,427 469,712
Financial assets at fair value through
profit or loss . . . . . . . . . . . . . . . . . . . 20 67,479 2,592 63,888 2,677
Securities purchased under agreements — — 213 —
to resell . . . . . . . . . . . . . . . . . . . . . . .
Interest receivables . . . . . . . . . . . . . . . . 22 12,168 23,558 49,416 39,317
Premiums receivables . . . . . . . . . . . . . . . 21,621 112,382 174,281 173,913
Reinsurance debtors . . . . . . . . . . . . . . . . 534 14,757 10,838 14,468
Reinsurers’ share of insurance contract
liabilities . . . . . . . . . . . . . . . . . . . . . . 5,008 7,855 24,104 40,509
Available-for-sale financial assets . . . . . 25 — 26,512 666,479 325,000
Investments classified as loans and 26 208,171 — 124,587 88,639
receivables . . . . . . . . . . . . . . . . . . . . .
Restricted statutory deposits. . . . . . . . . . 200,000 248,125 248,125 248,125
Investments in subsidiaries. . . . . . . . . . . 500,000 6,135,010 6,215,208 6,181,981
Property and equipment . . . . . . . . . . . . . 10,668 14,608 53,651 55,622
Intangible assets . . . . . . . . . . . . . . . . . . 11,735 40,330 147,953 173,835
Other assets . . . . . . . . . . . . . . . . . . . . . . 31 6,829 71,797 102,014 129,115
Total assets . . . . . . . . . . . . . . . . . . . . . . 1,174,065 7,401,150 8,640,184 7,942,913
EQUITY AND LIABILITIES
Equity
Share capital . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,240,625 1,240,625 1,240,625
Reserves . . . . . . . . . . . . . . . . . . . . . . . . 9,394 5,533,213 5,539,845 5,540,936
Accumulated loss . . . . . . . . . . . . . . . . . . (42,522) (495,951) (580,407) (735,879)
Total equity . . . . . . . . . . . . . . . . . . . . . 966,872 6,277,887 6,200,063 6,045,682
Liabilities
Securities sold under agreements to — 80 279,974 —
repurchase . . . . . . . . . . . . . . . ... . . .
Premiums received in advance . . ... . . . 1,061 16,519 61,608 30,681
Reinsurance payables . . . . . . . . . ... . . . 1,708 5,545 33,999 68,116
Policyholders’ deposits. . . . . . . . ... . . . — 12 211 203
Insurance contract liabilities . . . ... . . . 123,005 616,231 797,305 968,662
Investment contract liabilities . . ... . . . — 1,562 573,069 137,196
Other liabilities . . . . . . . . . . . . . ... . . . 38 81,419 483,314 693,955 692,373
Total liabilities . . . . . . . . . . . . . . . . . . . 207,193 1,123,263 2,440,121 1,897,231
Total equity and liabilities . . . . . . . . . . 1,174,065 7,401,150 8,640,184 7,942,913

— I-7 —
APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to equity holders of the parent

Reserves

Available-
for-sale (Accumulated
investment losses)/
Share Capital Surplus General revaluation Other Retained
capital reserves reserves reserves reserves reserves earnings Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


At 1 January 2014 . . . . . . 1,000,000 9,394 — — — — (29,912) 979,482
Total comprehensive income . — — — — 4,099 — 36,981 41,080

At 31 December 2014 . . . . 1,000,000 9,394 — — 4,099 — 7,069 1,020,562

Total comprehensive income . — — — — 69,055 — 44,257 113,312


Capital injection . . . . . . . . 240,625 5,495,872 — — — — — 5,736,497
Share based payment . . . . . — — — — — 27,947 — 27,947

At 31 December 2015 . . . . 1,240,625 5,505,266 — — 73,154 27,947 51,326 6,898,318

Total comprehensive income . — — — — (55,350) — 9,372 (45,978)


Share based payment . . . . . — — — — — 6,632 — 6,632

At 31 December 2016 . . . . 1,240,625 5,505,266 — — 17,804 34,579 60,698 6,858,972

Total comprehensive income . — — — — (11,727) — (202,096) (213,823)


Share based payment . . . . . — — — — — 1,091 — 1,091

At 31 March 2017. . . . . . . 1,240,625 5,505,266 — — 6,077 35,670 (141,398) 6,646,240

(Unaudited)
At 1 January 2016 . . . . . . 1,240,625 5,505,266 — — 73,154 27,947 51,326 6,898,318

Total comprehensive income . — — — — (3,048) — (255,385) (258,433)


Share based payment . . . . . — — — — — 2,158 — 2,158

At 31 March 2016. . . . . . . 1,240,625 5,505,266 — — 70,106 30,105 (204,059) 6,642,043

— I-8 —
APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended


Year ended 31 December 31 March

Notes 2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
OPERATING ACTIVITIES
Cash generated from/(used in)
operating activities . . . . . . . . 39 119,619 300,547 853,387 43,292 (518,053)
Net cash inflow/(outflow)
from operating activities . . . 119,619 300,547 853,387 43,292 (518,053)
INVESTING ACTIVITIES
Purchases of property and
equipment, intangible assets
and other assets . . . . . . . . . . (22,094) (39,673) (183,641) (25,506) (37,567)
Purchases of investments, net. . (178,610) (5,053,623) (1,225,144) (458,016) 592,722
Acquisition of a subsidiary and
other business entities, net . . — — (1,200) — —
Dividends and others received
from investments . . . . . . . . . 57,620 430,931 54,064 (174,363) 145,150
Net cash (outflow)/inflow
from investing activities . . . (143,084) (4,662,365) (1,355,921) (657,885) 700,305
FINANCING ACTIVITIES
Proceeds from investors . . . . . . — 5,775,000 — — —
Securities sold under
agreements to repurchase,
net . . . . . . . . . . . . . . . . . . . . 134,298 (141,478) 280,872 63,543 (280,819)
Transaction cost payment
related to financing
activities. . . . . . . . . . . . . . . . — (38,503) — — —
Net cash inflow/(outflow)
from financing activities . . . 134,298 5,595,019 280,872 63,543 (280,819)
Effects of exchange rate
changes on cash and cash
equivalents . . . . . . . . . . . . . . — — 9 (1) (31)
Net increase/(decrease) in cash
and cash equivalents . . . . . . . 110,833 1,233,201 (221,653) (551,051) (98,598)
Cash and cash equivalents at
the beginning of year/period . 30,863 141,696 1,374,897 1,374,897 1,153,244
Cash and cash equivalents at
the end of year/period . . . . 141,696 1,374,897 1,153,244 823,846 1,054,646

— I-9 —
APPENDIX I ACCOUNTANT’S REPORT

II NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

Approved by the China Insurance Regulatory Commission (the “CIRC”) of the People’s Republic
of China (the “PRC”), ZhongAn Online P & C Insurance Co., Ltd. (the “Company”) is a joint stock
company established on 9 October 2013.

The Company and its subsidiary (collectively, the “Group”) are principally engaged in Insuretech
business, which provides internet insurance services and insurance information services to customers.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the Financial Information are set
out below. These policies have been consistently applied to the Relevant Periods presented unless
otherwise stated.

2.1 Basis of preparation

The Financial Information of the Group has been prepared in accordance with Hong Kong
Financial Reporting Standards (“HKFRSs”) and the disclosure requirements of the Hong Kong
Companies Ordinance and the applicable disclosure required by the Rules Governing the Listing of
Securities on the Stock Exchange of Hong Kong Limited.

The Financial Information has been prepared under the historical cost convention other than
financial instruments that have been measured at fair values and insurance contract liabilities that have
been measured primarily based on actuarial methods. The preparation of Financial Information in
conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in process of applying the Group’s accounting policies. The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the Financial Information are disclosed in Note 3.

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APPENDIX I ACCOUNTANT’S REPORT

New and revised standards not yet adopted

Standards, amendments and interpretations that have been issued but not yet effective on 1
January 2017 and not been early adopted by the Group as of the Relevant Periods are as follows:

Effective for annual periods


beginning on or after

HKFRS 4 Amendments Applying HKFRS 9 with 1 January 2018


HKFRS 4 Insurance Contracts
HKFRS 9 Financial Instruments 1 January 2018
HKFRS 15 Revenue from contracts with 1 January 2018
customers
HKFRS 16 Leases 1 January 2019
IFRS 17 Insurance Contracts 1 January 2021
Amendments to HKFRSs Annual Improvements to 1 January 2018
HKFRSs 2014-2016 Cycle
Amendments to HKAS 40 Transfers of investment 1 January 2018
property
Amendments to HKFRS 2 Share based payments, on 1 January 2018
clarifying how to account for
certain types of share-based
payment transactions
HK(IFRIC 22) Foreign currency transactions 1 January 2018
and advance consideration
HK(IFRIC 23) Uncertainty over income tax 1 January 2019
treatments

None of these HKFRS is expected to have a significant effect on the consolidated financial
statements of the Group, except for the following as set out below:

HKFRS 9 and HKFRS 4 Amendments

HKFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of


financial assets and financial liabilities. The complete version of HKFRS 9 was issued in July 2014.
It replaces the guidance in HKAS 39 that relates to the classification and measurement of financial
instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortised cost, fair value through other
comprehensive income (“OCI”) and fair value through income statement. The basis of classification
depends on the entity’s business model and the contractual cash flow characteristics of the financial
asset. Investments in equity instruments are required to be measured at fair value through profit or loss
with the irrevocable option at inception to present changes in fair value in OCI which are not recycled
to profit or loss. There is now a new expected credit losses model that replaces the incurred loss

— I-11 —
APPENDIX I ACCOUNTANT’S REPORT

impairment model used in HKAS 39. For financial liabilities there were no changes to classification
and measurement except for the recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or loss. HKFRS 9 relaxes the
requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires
an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’
to be the same as the one management actually use for risk management purposes. Contemporaneous
documentation is still required but is different to that currently prepared under HKAS 39. The standard
is effective for accounting periods beginning on or after 1 January 2018. Amendments to HKFRS 4
address issues arising from the different effective dates of HKFRS 9, and will apply the upcoming new
insurance contracts standard. The amendments provide two optional approaches to deal with the
mismatched effective dates of HKFRS 9 and the new insurance contracts standard to replace HKFRS
4. The overlay approach allows all companies that issue insurance contracts to recognise in other
comprehensive income, rather than profit or loss, the volatility that could arise when HKFRS 9 is
applied before the new insurance contracts standard is issued. The deferral approach enables
companies whose activities are predominantly connected with insurance temporary exemption from
applying HKFRS 9 until 2021. Entities that defer the application of HKFRS 9 will continue to apply
HKAS 39 Financial Instruments: Recognition and Measurement.

The new rule changes the measurement categories of financial assets. Measurement categories
under HKAS 39 are fair value through profit or loss, available-for-sale, hold for maturity, and loans
and receivables. HKFRS 9 redefines this category model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through other comprehensive income and fair
value through income statement. The initial recognition of financial assets under the new rule will be
based on the entity’s business model for managing financial assets and their contractual cash flow
characteristics. Financial assets recognized as fair value through OCI are initially recognized and
subsequently measured at fair value and movements in the carrying amount should be taken through
OCI except for the recognition of impairment gains or losses, interest revenue and foreign exchange
gains and losses which are recognized in profit and loss. Financial assets included within fair value
through income statement should be measured at fair value and all changes taken through profit or
loss. Financial assets include in amortized costs are initially recognized at fair value and subsequently
measured at amortized cost. The abovementioned changes impact the Group both on consolidated
balance sheet and consolidated comprehensive income statement which is different from current
classification and measurement. Also a new impairment model is introduced which will replace the
current incurred loss model under HKAS 39. The impairment loss will be recognized in income
statement and it requires the Group to estimate the impairment loss in credit quality of the financial
assets which varies from current impairment loss model. Hence the impact on the Group is expected
to be significant. However, the Group concludes that the Group’s operation activities are
predominantly connected with insurance and decides to apply the deferral approach. Therefore, the
Group will not adopt the HKFRS 9 until 1 January 2021 and it won’t have impact on the Group until
2021.

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APPENDIX I ACCOUNTANT’S REPORT

HKFRS 15

HKFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and
establishes principles for reporting useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts
with customers. Revenue is recognised when a customer obtains control of a good or service and thus
has the ability to direct the use and obtain the benefits from the good or service. The standard replaces
HKAS 18 ‘Revenue’ and HKAS 11 ‘Construction contracts’ and related interpretations. The standard
is effective for annual periods beginning on or after 1 January 2018 and earlier application is
permitted. The Group is currently assessing the impact of HKFRS 15.

The Group assesses that adopting HKFRS 15 would not have a material impact to the Group’s
financial information.

HKFRS 16

HKFRS 16, ‘Leases’ addresses the definition of a lease, recognition and measurement of leases
and establishes principles for reporting useful information to users of financial statements about the
leasing activities of both lessees and lessors. A key change arising from HKFRS 16 is that almost all
operating leases will be accounted for on balance sheet for lessees, and the only optional exemptions
are for certain short-term leases and leases of low-value assets. The standard replaces HKAS 17
‘Leases’, and related interpretations. The standard is effective for annual periods beginning on or after
1 January 2019 and earlier application is permitted but only in conjunction with adopting HKFRS 15
‘Revenue from contracts with customers’ at the same time.

The Group is a lessee of various offices, which are currently classified as operating leases. The
Group’s current accounting policy for such leases is set out in Note 2.26 under which operating lease
payment is accounted for in the consolidated statements of comprehensive income when incurred and
the Group’s future operating lease commitments are not reflected in the consolidated balance sheets
but are disclosed in Note 42. IFRS 16 provides new provisions for the accounting treatment of leases
and all long-term leases, including future operating lease commitments, must be recognised in the
form of an asset (for the right of use) and a financial liability (for the payment obligation). Thus each
lease will be mapped in the Group’s consolidated balance sheets. In the income statement, leases will
be recognised in the future as capital expenditure on the purchasing side and will no longer be
recorded as an operating expense. As a result, the operating expenses under otherwise identical
circumstances will decrease, with depreciation and amortisation and the interest expense will increase.
The new standard will impact the balance sheet in terms of total assets and liabilities. The Group holds
material long-term leases, hence the impact of IFRS 16 would be material on its total assets and
liabilities while the impact on equity and the consolidated statement of comprehensive income is not
expected to be significant.

— I-13 —
APPENDIX I ACCOUNTANT’S REPORT

IFRS 17

IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. It applies to
the measurement of insurance contracts issued, all reinsurance contracts and investment contracts with
discretionary participating features.

It requires a current measurement model where estimates are re-measured each reporting period.
Contracts are measured using the building blocks of:

• discounted probability-weighted cash flows

• an explicit risk adjustment, and

• a contractual service margin (“CSM”) representing the unearned profit of the contract
which is recognised as revenue over the coverage period.

The standard allows a choice between recognising changes in discount rates either in the income
statement or directly in other comprehensive income. The choice is likely to reflect how insurers
account for their financial assets under IFRS 9.

An optional, simplified premium allocation approach is permitted for the liability for the
remaining coverage for short duration contracts, which are often written by non-life insurers.

There is a modification of the general measurement model called the ‘variable fee approach’ for
certain contracts written by life insurers where policyholders share in the returns from underlying
items. When applying the variable fee approach the entity’s share of the fair value changes of the
underlying items is included in the contractual service margin. The results of insurers using this model
are therefore likely to be less volatile than under the general model.

Also when measuring the insurance contracts, risk adjustment will need to reflect the
compensation that the Group requires for uncertainty and quantify the value between a certain and an
uncertain liability based on its own assessment. Acquisition costs can be deferred in a different
approach.

These changes under new rule will impact the Group’s financial performance in revenue
recognition, insurance contract liabilities provision and expense amortization and deferral, thus
impacting the statement of comprehensive income and financial position. Insurers are also required to
disclose information about amounts, judgements and risks arising from insurance contracts. Insurance
contracts revenue on the statement of comprehensive income which is a key performance indicator
will include expected claims and benefits and release of risks and amortization of CSM which is of
different components compared with current composition. Since the HKICPA is expected to adopt
IFRS 17 as HKFRS 17, the impact is expected to be significant. However, it won’t have impact on the
Group until 2021.

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APPENDIX I ACCOUNTANT’S REPORT

Amendments to HKFRSs: Annual Improvements to HKFRSs 2014-2016 Cycle

These amendments impact 2 standards: HKFRS 1, ‘First-time adoption of HKFRS’, regarding the
deletion of short term exemptions for first-time adopters regarding HKFRS 7, HKAS 19, and HKFRS
10 effective on January 1, 2018. HKAS 28, ‘Investments in associates and joint ventures’ regarding
measuring an associate or joint venture at fair value.

Amendments to HKAS 40

These amendments clarify that to transfer to, or from, investment properties there must be a
change in use. To conclude if a property has changed use there should be an assessment of whether
the property meets the definition. This change must be supported by evidence.

Amendments to HKFRS 2

This amendment clarifies the measurement basis for cash-settled share-based payments and the
accounting for modifications that change an award from cash-settled to equity-settled. It also
introduces an exception to the principles in HKFRS 2 that will require an award to be treated as if it
was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax
obligation associated with a share-based payment and pay that amount to the tax authority.

HK(IFRIC) 22

This HK(IFRIC) addresses foreign currency transactions or parts of transactions where there is
consideration that is denominated or priced in a foreign currency. The interpretation provides guidance
for when a single payment/receipt is made as well as for situations where multiple payments/receipts
are made. The guidance aims to reduce diversity in practice.

HK(IFRIC) 23

It may be unclear how tax law applies to a particular transaction or circumstance, or whether a
taxation authority will accept a company’s tax treatment. HKAS 12 Income Taxes specifies how to
account for current and deferred tax, but not how to reflect the effects of uncertainty. HK(IFRIC) 22
provides requirements that add to the requirements in HKAS 12 by specifying how to reflect the
effects of uncertainty in accounting for income taxes.

Except the above mentioned impact of HKFRS 9 and IFRS 17, the Group expects adoption of the
above new HKFRS, amendments to HKFRS and HK(IFRIC) interpretations issued but not yet effective
will not have a material impact on the Group’s operating results, financial position or other
comprehensive income.

— I-15 —
APPENDIX I ACCOUNTANT’S REPORT

2.2 Subsidiaries

2.2.1 Consolidation

A subsidiary is an entity (including a structured entity) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.

(a) Business combinations

The Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred,
the liabilities incurred to the former owners of the acquiree and the equity interests issued by the
Group. The consideration transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date.

The Group recognises any non-controlling interest in the acquiree on an


acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are present ownership
interests and entitle their holders to a proportionate share of the entity’s net assets in the event of
liquidation are measured at either fair value or the present ownership interests’ proportionate share in
the recognised amounts of the acquiree’s identifiable net assets. All other components of
non-controlling interests are measured at their acquisition date fair value, unless another measurement
basis is required by HKFRSs.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the
acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition
date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed
to be an asset or liability is recognised in accordance with HKAS 39 in profit or loss. Contingent
consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted
for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair
value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration

— I-16 —
APPENDIX I ACCOUNTANT’S REPORT

transferred, non-controlling interest recognised and previously held interest measured is less than the
fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference
is recognised directly in the income statement (Note2.7).

Intra-group transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been
adjusted to conform with the Group’s accounting policies.

2.2.2 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct
attributable costs of investment. The results of subsidiaries are accounted for by the Company on the
basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from
these investments if the dividend exceeds the total comprehensive income of the subsidiary in the
period the dividend is declared or if the carrying amount of the investment in the separate financial
statements exceeds the carrying amount in the consolidated financial statements of the investee’s net
assets including goodwill.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the
steering committee that makes strategic decisions. The Group has determined the management team
represented by the Chief Executive Officer as its chief operating decision maker.

The measurement of segment assets and liabilities, as well as segment revenue, expense and
results is based on the Group’s accounting policies. There is no difference between the accounting
policies used in the preparation of the Group’s financial statements and those used in preparing the
operating segment information.

Segment revenue, results, assets and liabilities include items directly attributable to a segment
as well those that can be allocated on a reasonable basis.

Currently, the Group operates its business as one single segmentation. No separate segment
information is necessary to be disclosed. More than 99% of the Group’s revenue is derived from its
operations in the PRC. More than 99% of the Group’s assets are located in the PRC.

— I-17 —
APPENDIX I ACCOUNTANT’S REPORT

2.4 Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (“the functional
currency”). The consolidated financial statements are presented in RMB, which is the Company’s
functional and the Group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the statements of comprehensive income, except when deferred in other comprehensive income as
qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses are presented in the statement of comprehensive income
within “Other operating and administrative expenses”.

2.5 Property and equipment and depreciation

Property and equipment can be recognized only when future economic benefits expected to be
obtained from the use of the item will flow into the Group and its cost can be measured reliably.
Expenditure incurred after items of property and equipment have been put into operation is normally
charged to the income statement in the period in which it is incurred. In situations where it can be
clearly demonstrated that the expenditure has met the recognition criteria, the expenditure is
capitalized as an additional cost of that asset and the confirmation of the book value of the replaced
part should be stopped.

Property and equipment are initially measured at cost after considering the impact of the
expected disposal expenses. The cost of an item of property and equipment comprises its purchase
price, related taxes and fees and any directly attributable costs of bringing the asset to its intended use.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property
and equipment to its residual value over its estimated useful life. The expected useful life, estimated
residual value rate and annual depreciation rate used for this purpose are as follows:

Expected useful Estimated residual Annual


Category life value rate depreciation rate

Electrical equipment . . . . . . . . . . . . . . . . . . . . . 5years 5% 19%


Office furniture and equipment . . . . . . . . . . . . . 5years 5% 19%
Motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . 5years 5% 19%
Leasehold improvements . . . . . . . . . . . . . . . . . . 3years 0% 33%

— I-18 —
APPENDIX I ACCOUNTANT’S REPORT

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (Note 2.8).

Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognised within “Other operating and administrative expenses” in the statement of
comprehensive income.

2.6 Intangible assets

The Group’s intangible assets include computer software and Chinese domain name registration.

Intangible assets can be recognized only when future economic benefits expected to be obtained
from the use of the item will flow into the Group and its cost can be measured reliably. Intangible
assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is the fair value as at the date of acquisition.

Costs associated with maintaining computer software programmes are recognised as an expense
as incurred. Development costs that are directly attributable to the design and testing of identifiable
and unique software products controlled by the Group are recognised as intangible assets when the
following criteria are met:

• It is technically feasible to complete the software product so that it will be available for
use;

• Management intends to complete the software product and use or sell it;

• There is an ability to use or sell the software product;

• It can be demonstrated how the software product will generate probable future economic
benefits;

• Adequate technical, financial and other resources to complete the development and to use
or sell the software product are available; and

• The expenditure attributable to the software product during its development can be reliably
measured.

Directly attributable costs that are capitalised as part of the software product include the
software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as
incurred. Development costs previously recognised as an expense are not recognised as an asset in a
subsequent period.

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APPENDIX I ACCOUNTANT’S REPORT

The useful lives of intangible assets are assessed by the period of bringing economic benefits for
the Company. If the period of bringing economic benefits cannot be determined, intangible assets will
be classified as indefinite intangible assets.

The expected service lives of intangible assets are as follows:

Useful life

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10 years


Chinese domain name registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 years

Intangible assets with finite lives are subsequently amortized on the straight-line basis over the
useful economic life. The amortization period and the amortization method for an intangible asset with
a finite useful life are reviewed, and adjusted if appropriate, at least at each year end.

2.7 Goodwill

Goodwill arises on the acquisition of subsidiaries represents the excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair value of the identified net assets
acquired.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated
to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from
the synergies of the combination. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is monitored for internal
management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of the CGU containing the
goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value
less costs of disposal. Any impairment is recognised immediately as an expense and is not
subsequently reversed. The recoverable amount of such CGU is mainly contributed by discounted cash
flows from operations after considering the parameters including but not limited to income streams,
estimated cost of sales and etc.

2.8 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not
subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s

— I-20 —
APPENDIX I ACCOUNTANT’S REPORT

fair value less costs to sell of disposal and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date.

2.9 Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: at fair value through profit
or loss, loans and receivables, held-to-maturity financial assets and available for sale. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and
financial assets designated as at fair value through profit of loss. Financial assets are classified as held
for trading if they are acquired for the purpose of sale in the near term. Derivatives, including
separated embedded derivatives, are also classified as held for trading unless they are designated as
effective hedging instruments or financial guarantee contracts. Derivatives are also classified as held
for trading unless they are designated as hedges.

Financial assets designated as at fair value through profit of loss at inception are those that are:

• Held in internal funds to match insurance and investment contracts liabilities that are linked
to the changes in fair value of these assets. The designation of these assets to be at fair
value through profit or loss eliminates or significantly reduces a measurement or
recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would
otherwise arise from measuring assets or liabilities or recognising the gains and losses on
them on different bases; and

• Managed and whose performance is evaluated on a fair value basis. Information about these
financial assets is provided internally on a fair value basis to the Group’s key management
personnel. The Group’s investment strategy is to invest in equity and debt securities and to
evaluate them with reference to their fair values. Assets that are part of these portfolios are
designated upon initial recognition at fair value through profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. After initial measurement, such assets are subsequently carried
at amortized cost using the effective interest rate method less any allowance for impairment.
Amortized cost is calculated by taking into account any discount or premiums on acquisition and
includes fees or costs that are an integral part of the effective interest rate.

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APPENDIX I ACCOUNTANT’S REPORT

Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturity are
classified as held to maturity when the Group has the positive intention and ability to hold to maturity.
Held-to-maturity financial assets are subsequently measured at amortized cost less any allowance for
impairment. Amortized cost is calculated taking into account any discount or premium on acquisition
and includes fees or costs that are an integral part of the effective interest rate.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category
or not classified in any of the other categories.

(b) Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade-date — the date
on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets carried at fair value through profit or loss are initially recognised at fair value, and
transaction costs are expensed in the income statement. Financial assets are derecognised when the
rights to receive cash flows from the investments have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and
financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through
profit or loss’ category are presented in the statement of comprehensive income within ‘Net fair value
gains from profit or loss’ in the period in which they arise. Dividend income from financial assets at
fair value through profit or loss is recognised in the statement of comprehensive income as part of
investment income when the Group’s right to receive payments is established.

Changes in the fair value of monetary and non-monetary securities classified as available for sale
are recognised in other comprehensive income.

When securities classified as available for sale are sold or impaired, the accumulated fair value
adjustments recognised in other comprehensive income are included in the income statement as net
realised gains on financial assets.

Interest on available-for-sale securities calculated using the effective interest method is


recognised in the statement of comprehensive income. Dividends on available-for-sale equity
instruments are recognised in the statement of comprehensive when the Group’s right to receive
payments is established.

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APPENDIX I ACCOUNTANT’S REPORT

2.10 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement
is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or
liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.

For financial instruments where there is no active market, fair value is determined using
valuation techniques. Such techniques include using recent arm’s length market transactions;
reference to the current market value of another instrument which is substantially the same; a
discounted cash flow analysis; and other valuation models. For discounted cash flow techniques,
estimated future cash flows are based on directors’ best estimates and the discount rate used is a
market related rate for a similar instrument. Certain financial instruments, including derivative
financial instruments, are valued using pricing models that consider, among other factors, contractual
and market prices, correlation, time value of money, credit risk, yield curve volatility factors and/or
prepayment rates of the underlying positions. The use of different pricing models and assumptions
could produce materially different estimates of fair values.

The fair values of floating rate and overnight deposits with credit institutions are their carrying
values. The carrying value is the cost of the deposit and accrued interest. The fair value of fixed
interest-bearing deposits is estimated using discounted cash flow techniques. Expected cash flows are
discounted at current market rates for similar instruments at the balance sheet date.

— I-23 —
APPENDIX I ACCOUNTANT’S REPORT

2.11 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle
on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right
must not be contingent on future events and must be enforceable in the normal course of business and
in the event of default, insolvency or bankruptcy of the company or the counterparty.

2.12 Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that
a financial asset or a group of financial assets is impaired.

Assets carried at amortized cost

If there is objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred). The related collateral
value shall also be taken into account. The present value of the estimated future cash flows is
discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate
computed at initial recognition or the current effective interest rate if a loan has a variable interest
rate).

The carrying amount of the asset is reduced either directly or through the use of an allowance
account and the amount of the loss is recognized in the income statement. Interest income continues
to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together
with any associated allowance are written off when there is no realistic prospect of future recovery.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases
because of an event occurring after the impairment was recognized, the previously recognized
impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later
recovered, the recovery is credited to the income statement.

Assets classified as available for sale

For debt securities, if any such evidence exists the cumulative loss — measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in profit or loss — is removed from equity and recognised in profit or loss. If,
in a subsequent period, the fair value of a debt instrument classified as available for sale increases and
the increase can be objectively related to an event occurring after the impairment loss was recognised
in profit or loss, the impairment loss is reversed through the consolidated statement of comprehensive
income.

— I-24 —
APPENDIX I ACCOUNTANT’S REPORT

For equity investments, a significant or prolonged decline in the fair value of the security below
its cost is also evidence that the assets are impaired. If any such evidence exists the cumulative loss
— measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised in profit or loss — is removed from
equity and recognised in profit or loss. Impairment losses recognised in the consolidated income
statement on equity instruments are not reversed through the consolidated income statement. The
Group inspects the equity instrument investments individually at the balance sheet date. Recognition
of an impairment loss is required if the fair value is below the initial investment cost by more than
50% (included) or for a continuous period of more than one year(included). The Group uses the
weighted average method to calculate the initial costs of available-for-sale equity investments.

2.13 Securities purchased under agreements to resell

The Group enters into purchases of securities under agreements to resell substantially identical
securities. These agreements are classified as loans and receivables. The amount advanced under these
agreements are reflected as assets in the balance sheet. The Group does not take physical possession
of securities purchased under agreements to resell. In the event of default by the counterparty to repay
the loan, the Group has the right to the underlying securities.

2.14 Reinsurance

The Group cedes insurance risk in the normal course of business. Reinsurance agreements that
transfer significant insurance risk are treated as reinsurance contracts; reinsurance agreements that do
not transfer significant insurance risk are not treated as reinsurance contracts.

Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders.
At the recognition of direct insurance revenue, the Group recognizes premiums ceded and reinsurance
claims recoverable as income and expenses. In the period of recognizing unearned premium reserves
and outstanding claim reserves, the Group recognizes reinsurance assets based on estimated cash flow
and margin factors.

Reinsurance assets and direct insurance contract liabilities are shown separately in balance sheet.
Also, reinsurance income and expenses cannot be offset by direct insurance contract income and
expenses in income statement.

2.15 Cash and cash equivalents

In the consolidated statements of cash flows, cash and cash equivalents include cash in hand,
deposits held at call with banks, other short-term highly liquid investments with original maturities
of three months or less, bank overdrafts and money market fund.

2.16 Share capital

Ordinary shares are classified as equity.

— I-25 —
APPENDIX I ACCOUNTANT’S REPORT

Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.

2.17 Insurance contracts

Insurance contracts are those contracts under which the Group has accepted significant insurance
risk from the policyholders by agreeing to compensate the policyholders if a specified uncertain future
event (the insured event) adversely affects the policyholders. Insurance contracts are classified as
direct insurance contracts and reinsurance contracts. The significance of insurance risk as determined
by the Group is dependent on both the probability of an insurance event and the magnitude of its
potential effect.

Contracts that only transfer insurance risk are treated as insurance contracts. If the Group signs
contracts with policyholders which transfer insurance risk as well as other risks, the treatments would
depend on:

• If the insurance risk portion and other risk portion are distinct and separately measurable,
the insurance risk portion and other risk portion should be unbundled. The portion with
insurance risk should be treated as an insurance contract, while the portion with other risks
should not be treated as an insurance contract.

• If the insurance risk portion and other risk portion cannot be distinct, or if they are distinct
but cannot be separately measurable, the whole contract should be treated as an insurance
contract if the insurance risk is significant; the whole contract should not be treated as an
insurance contract if the insurance risk is insignificant.

2.18 Testing the significance of insurance risk

For contracts issued by the Group which require testing the significance of insurance risk, it
should be performed at the initial recognition of such contracts, and based on a group of contracts with
a similar nature.

When testing the significance of insurance risk, the Group makes judgements in this sequence:
(i) whether the contract transfers insurance risk; (ii) whether the contract has commercial substance;
(iii) whether the insurance risk transferred is significant.

When determining whether the contracts (or policies) transfer significant insurance risk, the
Group considers: (i) annuity contracts that transfer longevity risk are treated as insurance contracts;
(ii) for non-annuity contracts, if the insurance risk ratio is greater than or equal to 5% at certain points
of time during the duration of the contracts, they are treated as insurance contracts; the insurance risk
ratio is derived by comparing the benefits paid with the benefits payable if the insured event did not
occur. For property and casualty and short-term life policies that obviously transfer significant risk,
the Group recognizes them as insurance contracts directly.

— I-26 —
APPENDIX I ACCOUNTANT’S REPORT

When determining whether reinsurance policies transfer significant insurance risk, the Group
considers thoroughly the commercial substance and other relevant contracts and agreements, and if the
insurance risk ratio of reinsurance policies is greater than 1%, they are treated as reinsurance
contracts. The insurance risk ratio of reinsurance policies is derived by comparing the present value
of probability-weighted expected loss with the present value of expected reinsurance premiums. If the
reinsurance policies obviously transfer significant insurance risk, the Group directly recognizes them
as reinsurance contracts.

For the purpose of testing the significance of insurance risk, contracts of a similar nature are
grouped together. Through considering the risk distribution and characteristics, the Group selects
sufficient representative samples to test the significance of insurance risk. If most samples transfer
significant insurance risk, all contracts in the group are treated as insurance contracts.

The assumptions used for testing the significance of insurance risk mainly include loss ratio,
mortality and morbidity, loss distribution, etc. The Group determines such assumptions based on
historical experiences and the estimation on future development trends so as to reflect the Group’s
product characters and actual claim payments.

2.19 Insurance contract liabilities

The Company’s insurance contract liabilities include unearned premium reserves and claim
incurred reserves.

When measuring insurance contract liabilities, insurance contracts whose insurance risks are of
a similar nature are classified as a measurement unit. The company’s contracts mainly include credit
insurance, bond insurance, enterprise property insurance, household property insurance, health
insurance, accident insurance, liability insurance, cargo insurance, motor insurance and other
insurance.

Insurance contract liabilities are measured based on a reasonable estimate of the amount of
payments when the company fulfils relevant obligations under the insurance contracts, which
represents the difference between expected future cash outflows and inflows under such contracts.

• Expected future cash outflows represent reasonable cash outflows which are necessary for
the company to fulfill relevant obligations under the insurance contracts, and mainly
include: (a) guaranteed benefits or claims under the insurance contracts; (b) reasonable
expenses necessary for maintaining and serving the insurance contracts, claims handling,
including policy maintenance expenses, claim expenses, etc.

• Expected future cash inflows represent cash inflows from assuming insurance contractual
obligations, including premiums and other charges.

Reasonable estimate of expected net future cash flows is determined based on information
currently available at the balance sheet date.

— I-27 —
APPENDIX I ACCOUNTANT’S REPORT

Margins are considered and separately measured in determining insurance contract liabilities.
Margins are released in the income statement over the insurance coverage period using systematic and
reasonable methods. Margins include risk margin and residual margin.

• Risk margin represents provision for the uncertainty associated with the future net cash
flows.

• At inception of an insurance contract, any “day-one” gain is not recognised in the income
statement, but included in the insurance contract liabilities as a residual margin. At
inception of an insurance contract, any “day-one” loss is recognised in the income
statements.

The Group amortises the residual margin on a time basis during the whole insurance coverage
period and records it in profit or loss.

When measuring insurance contract liabilities, time value of money is considered. The related
future cash flows are discounted when the impact of time value of money is significant. For short
duration contracts which duration is within one year, the cash flows are not discounted. The discount
rate used in the measurement of time value of money is determined with reference to information
currently available as at the end of each reporting date and is not locked.

Unearned premium reserves

Unearned premium reserves are measured by using the unearned premium approach. At inception
of the contract, unearned premium reserves are measured based on premiums received with deduction
of relevant acquisition costs such as commission charge, business tax, insurance guarantee fund,
supervision fees, etc. After initial recognition, unearned premium reserves are released over the term
of the contract using a 365-day basis or other methods regarding to relevant nature and risk
distribution.

The Company performs liability adequacy tests using discounted cash flow method at the balance
sheet date. Additional insurance contract liabilities should be made and recognized in the income
statement if any deficiency exists.

Claim reserves

Claim reserves represent insurance contract provisions for non-life insurance accidents, which
include incurred and reported claim reserves, incurred but not reported (“IBNR”) claim reserves and
claim expense reserves.

Incurred and reported claim reserves represent insurance contract provisions for the claims
incurred and reported to the company. The company uses case-by-case estimate method to measure
incurred and reported claims reserves based on a reasonable estimate of the ultimate claims amount
and the margin factor.

— I-28 —
APPENDIX I ACCOUNTANT’S REPORT

IBNR claim reserves represent insurance contract provisions for the claims incurred but not
reported to the company. The company uses loss ratio method and chain ladder method to measure
IBNR claim reserves based on a reasonable estimate of the ultimate claims amount and the margin
factor, and after considering industry benchmark and experience data, etc.

Claim expense reserves represent insurance contract provisions for related claims handling costs.
The company uses case-by-case estimate method for direct claim expense reserves and ratio allocation
method to measure indirect claim expense reserves with consideration to margin factor.

2.20 Investment contract liabilities

Investment contract liabilities mainly represent liabilities with regard to the non-insurance
portion of related contracts, and those contracts which do not pass the testing of significant insurance
risk. For those non-life investment type policies without guaranteed benefits, the related contract
liabilities are measured at fair value and the related transaction costs are recognized in the statement
of income. Commissions and other expenses incurred, net of receipts from initial charges that are
meant to compensate such costs, are recognized as transaction costs in the initial amount of the
liabilities.

2.21 Securities sold under agreements to repurchase

Securities sold under agreements to repurchase are financial liabilities and are recorded at
amortized cost. The Group may be required to provide additional collateral based on the fair value of
the underlying securities and such collateral assets continued to be carried on the balance sheet.

2.22 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the
income statement, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income
or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the company’s subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate.

Deferred income tax is recognised, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, if the deferred income tax arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the transaction affects neither

— I-29 —
APPENDIX I ACCOUNTANT’S REPORT

accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period
and are expected to apply when the related deferred income tax asset is realised or the deferred income
tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries,


except where the Group controls the timing of the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.

The tax effects of carry-forwards of unused losses or unused tax credits are recognised as an
asset when it is probable that future taxable profits will be available against which these losses can
be utilised.

Deferred tax related to fair value re-measurement of available-for-sale investments and cash flow
hedges, which are charged or credited directly in other comprehensive income, is also credited or
charged directly to other comprehensive income and subsequently recognised in the consolidated
income statement together with the deferred gain or loss.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all
or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each
balance sheet date and are recognized to the extent that it has become probable that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be recovered.

2.23 Employee benefits

(a) Pension schemes

The employees of the Group participate in various defined contribution pension plans principally
organised by municipal and provincial governments. The Group makes and accrues contributions to
the pension plans based on certain percentages of the salaries of the employees on a monthly basis.
The Group has no other significant legal or constructive obligations for retirement benefits beyond the
said contributions, which are expensed as incurred.

— I-30 —
APPENDIX I ACCOUNTANT’S REPORT

The Group pays early retirement benefits to those employees who accept early retirement
arrangements approved by management. Early retirement benefits are paid to those employees who
voluntarily retire before the normal retirement date. The related benefit payments are made from the
date of early retirement through the normal retirement date. The Group records a liability for the
present value of its early retirement obligation when employees retire early.

(b) Housing benefits

The employees of the Group are entitled to participate in various government sponsored housing
funds. The Company and these subsidiaries contribute on a monthly basis to these funds based on
certain percentages of the salaries of the employees. The Group’s liability in respect of these funds
is limited to the contributions payable in each period.

(c) Medical benefits

The Group makes contributions for medical benefits to the local authorities in accordance with
the relevant local regulations.

2.24 Share-based payments

The Group operates an equity-settled, share-based compensation plan, under which the Group
receives services from employees as consideration for equity instruments of the Group. The fair value
of the employee services received in exchange for the grant of the equity instruments is recognised
as an expense. The total amount to be expensed is determined by reference to the fair value of the
equity instruments granted:

• Including any market performance conditions;

• Excluding the impact of any service and non-market performance vesting conditions;

• Including the impact of any non-vesting conditions.

At the end of each reporting period, the Group revises its estimates of the number of equity
instruments that are expected to vest based on the non-marketing performance and service conditions.
It recognises the impact of the revision to original estimates, if any, in the income statement, with a
corresponding adjustment to equity.

If the terms of an equity-settled award are modified, at a minimum an expense is recognised as


if the terms had not been modified. An additional expense is recognised for any modification that
increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the
employee, as measured at the date of modification.

— I-31 —
APPENDIX I ACCOUNTANT’S REPORT

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation,


and any expense not yet recognised for the award is recognised immediately. However, if a new award
is substituted for the cancelled award, and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they were a modification of the original award,
as described in the previous paragraph.

2.25 Revenue recognition

Revenue is recognized when it is probable that the economic benefits will flow to the Group and
when the revenue can be measured reliably, on the following bases:

(a) Premium revenue

Premium revenue is recognized when the insurance contract are issued and the related insurance
risk is undertaken by the Group, the economic benefits associated with the insurance contract will
probably flow to the Group and when the revenue can be measured reliably.

Premiums from direct insurance contracts are recognized as revenue based on the amount of total
premiums stated in the contracts.

(b) Investment income

Investment income includes interest from term deposits, fixed maturity securities, securities
purchased under agreements to resell, policy loans and other loans, dividends from investment funds
and securities, etc.

Interest income is recognized on an accrual basis using the effective interest rate method by
applying the rate that discounts the estimated future cash receipts through the expected life of the
financial instrument to the net carrying amount of the financial asset.

Dividends are recognized when the shareholders’ right to receive payment is established.

2.26 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a straight-line basis over the period
of the lease.

2.27 Government grants

Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached conditions.

— I-32 —
APPENDIX I ACCOUNTANT’S REPORT

Government grants relating to costs are deferred and recognised in the income statement over the
period necessary to match them with the costs that they are intended to compensate.

Government grants relating to assets included in the liabilities as deferred government grants and
are credited to the income statement on a straight-line basis over the expected lives of the related
assets.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s consolidated financial statements requires directors of the
Company to make judgements and estimates that affect the reported amounts of revenues, expenses,
assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However,
uncertainty about these assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amounts of the assets and liabilities affected in the future.
Estimates and judgements are continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable.

3.1 Fair value of share-based compensation expenses

The Group has awarded equity instruments to eligible directors and employees. The Group has
used Black-Scholes Option Pricing Model and Binomial Option Pricing Model to determine the total
fair value of the equity instruments awarded. Significant estimates on key assumptions, such as the
underlying equity value, risk-free interest rate, expected volatility and dividend yield, are required to
be made by the Company in applying the Black-Scholes Option Pricing Model and Binomial Option
Pricing Model.

The fair values of equity instruments granted are measured on the respective grant dates based
on the fair value of the underlying shares. In addition, the Group is required to estimate the expected
percentage of grantees that will remain in employment with the Group. The Group only recognizes an
expense for those equity instruments expected to vest over the vesting period during which the
grantees become unconditionally entitled to these share-based awards. Changes in these estimates and
assumptions could have a material effect on the determination of the fair value of the equity
instruments and the amount of such share-based awards expected to become vested, which may in turn
significantly impact the determination of the share-based compensation expenses.

The fair value of equity instruments at the time of grant is to be expensed over the vesting period
of these share-based awards on an accelerated graded attribution approach. Under the accelerated
graded attribution approach, each vesting installment of a graded vesting award is treated as a separate
share-based award, which means that each vesting installment will be separately measured and
attributed to expense, resulting in accelerated recognition of share-based compensation expenses.

— I-33 —
APPENDIX I ACCOUNTANT’S REPORT

Based on the fair value of the share-based awards, the expected turnover rate of grantees and the
probability that the performance conditions for vesting are met, the corresponding share-based
compensation expenses recognized by the Group in respect of their services rendered for the years
ended 31 December 2015, 2016 and the three months ended 31 March 2016 and 2017 were RMB27,947
thousand, RMB6,632 thousand, RMB2,158 (unaudited) and RMB1,091 respectively.

3.2 Valuation of insurance contract liabilities

When measuring the insurance contract liabilities, the Group needs to make a reasonable
estimate of the amounts that the Group is required to pay in fulfilling the obligations under the
insurance contracts. Such estimates are determined by calculating various possible outcomes and
relevant probabilities based on information currently available as at the balance sheet date.

At the balance sheet date, the Group makes estimates of the assumptions used in the measurement
of insurance contract liabilities. The Group determines such assumptions based on information
currently available as at the balance sheet date and a risk adjustment is considered.

Unearned premium reserves

The main assumptions used in measuring unearned premium reserves include discount rate,
expense assumptions, loss ratios and risk margin, etc.

(a) Discount rate

Unearned premium reserves will not be discounted when being measured because the durations
of all insurance category are less than 1 year.

(b) Expense assumptions

The Group develops its expense assumption on its expense analysis and future expectation for
policy acquisition costs and maintenance expenses.

The Group’s expense assumption is determined based on industry analysis, industry standards
and economic environment. The Group’s expense assumption is affected by certain factors, such as
inflation, market competition and other factors. Depending on these factors, the Group’s expense
assumption is uncertain.

(c) Loss ratios

The Group develops its loss ratio assumption on analysis of its historical claims payments
experience, future development trends and industry experiences.

— I-34 —
APPENDIX I ACCOUNTANT’S REPORT

(d) Risk margin

The risk margin represents provision for the uncertainty associated with the future cash flows.
The risk adjustment is determined by reference to the industry benchmark and the risk adjustment for
unearned premium reserves is 5.5 percent of unbiased estimate of future net cash flow present value.

Claim reserves

Claim reserve depends mainly on claim development factors and expected loss ratio to predict
the future cost of claims. Claim developments factors and the expected loss ratio for various
measurement units are based on past claims development experience and loss ratios, taking into
consideration changes in company policies such as the underwriting policy, expenses and claims
handling, and changing trends in external environments such as economic conditions, regulations and
legislation. The Group determined the risk margin assumptions for claim reserves based on the
available information at the end of each of the reporting date. In assessing claim reserves, the risk
margin was determined at 5 percent.

3.3 Capitalization of development costs

The Group needs to go through two stages before a certain intangible asset is recognized by
capitalization of development costs. The Group identifies the stage as research during which the
Group studies and evaluates the feasibility of the intangible assets. The Group identifies the stage as
development during which the Group begins to work on the development of intangible assets when put
the result of research into application. The Group capitalizes the cost of development only when the
cost meet the criteria as set out in Note 2.6.

3.4 Recognition of deferred income tax assets

Recognition of deferred income tax assets, which principally relate to temporary differences,
depend on the management’s expectation of the timing of reversal and the taxable profit that will be
available against which tax losses can be utilizsed. The outcome of their actual utilization or reversal
may be different.

4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK

(a) Insurance risk

The risk under any one insurance contract is the possibility that the insured event occurs and the
uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk
is random and therefore unpredictable.

Insurance risk could occur due to any of the following factors:

Occurrence risk — the possibility that the number of insured events will differ from that
expected.

— I-35 —
APPENDIX I ACCOUNTANT’S REPORT

Severity risk — the possibility that the cost of the events will differ from that expected.

Development risk — the possibility that changes may occur in the amount of an insurer’s
obligation at the end of the contract period.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and
provisioning, the principal risk that the Group faces under its insurance contracts is that the actual
claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur
because the frequency or severity of claims and benefits are greater than estimated. Insurance events
are random, and the actual number and amount of claims and benefits will vary from year to year from
the level established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the
relative variability about the expected outcome will be. In addition, a more diversified portfolio is less
likely to be affected by a change in any subset of the portfolio. The Group has developed its insurance
underwriting strategy to diversify the type of insurance risks accepted and within each of these
categories to achieve a sufficiently large population of risks to reduce the variability of the expected
outcome.

The Group’s concentration of insurance risk is reflected by its major lines of business as
analyzed by premium income in Note 6.

Key assumptions

Outstanding claims reserves are mainly based on assumptions of ultimate loss ratio which is
determined after considering industry benchmark, experience data, discount and margin factors.
Significant cases need to be considered separately and reflected by estimated amount. These
assumptions in respect of average claim costs, claims handling costs, claims inflation factors and
claim numbers for each accident year. Additional qualitative judgements are used to assess the extent
to which past trends may not apply in the future, for example one-off occurrence, changes in market
factors such as public attitude to claiming, economic conditions, as well as changes in internal factors
such as portfolio mix, policy conditions and claims handling procedures. Judgement is further used to
assess the extent to which external factors such as judicial decisions and government legislation affect
the estimates.

Other key assumptions include explicit margin, delays in settlement, etc.

Sensitivities

Outstanding claim reserves are sensitive to the above key assumptions. The sensitivity of certain
variables like legislative changes, uncertainty in the estimation process, is not possible to quantify.
Furthermore, because of delays that arise between occurrence of a claim and its subsequent
notification and eventual settlement, the outstanding claim reserves are not known with certainty at
the balance sheet date.

— I-36 —
APPENDIX I ACCOUNTANT’S REPORT

Ultimate loss ratio change results in changes in outstanding claim reserves. The following table
reflects sensitive analysis of key assumptions relevant to outstanding claim reserves. Under the
condition when other variables remain constant, changes in net profit after income tax and equity due
to average claim change are as follows:

Changes in average claim costs 31 December 2014

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,658) (1,658)
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,658 1,658

Changes in average claim costs 31 December 2015

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,621) (8,621)
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,621 8,621

Changes in average claim costs 31 December 2016

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,712) (9,712)
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,712 9,712

Changes in average claim costs 31 March 2017

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,078) (12,078)
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,078 12,078

— I-37 —
APPENDIX I ACCOUNTANT’S REPORT

Claim development tables

The following tables reflect the cumulative incurred claims, including both claims notified and
IBNR for each successive accident year at each balance sheet date, together with cumulative payments
to date.

Gross insurance claim reserves:

Three
Accident year
months
2013 2014 2015 2016 ended 2017 Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Estimate of ultimate claim
cost as of:
End of current year . . . . . . . 4,514 517,522 1,322,518 1,486,098 403,349
One year later . . . . . . . . . . . 4,261 493,173 1,191,464 1,470,861
Two years later . . . . . . . . . . 4,259 492,987 1,185,628
Three years later . . . . . . . . . 4,257 492,675
Four years later . . . . . . . . . . 4,245
Current estimate of
cumulative claims . . . . . . 4,245 492,675 1,185,628 1,470,861 403,349 3,556,758
Cumulative payments to
date . . . . . . . . . . . . . . . . . (4,245) (492,674) (1,180,411) (1,374,955) (281,281) (3,333,566)
Liability in respect of prior
years, unallocated loss
adjustment expenses,
assumed business,
discount and risk
adjustment margin . . . . . . 22,481
Total gross claim reserves
included in the
consolidated statements of
financial position . . . . . . . 245,673

— I-38 —
APPENDIX I ACCOUNTANT’S REPORT

Net insurance claim reserves:

Three
Accident year
months
2013 2014 2015 2016 ended 2017 Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Estimate of ultimate claim
cost as of:
End of current year . . . . . . . 4,514 514,695 1,304,608 1,478,789 399,597
One year later . . . . . . . . . . . 4,261 492,173 1,173,973 1,462,630
Two years later . . . . . . . . . . 4,259 491,978 1,168,127
Three years later . . . . . . . . . 4,257 491,666
Four years later . . . . . . . . . . 4,245
Current estimate of
cumulative claims . . . . . . 4,245 491,666 1,168,127 1,462,630 399,597 3,526,265
Cumulative payments to
date . . . . . . . . . . . . . . . . . (4,245) (491,666) (1,162,911) (1,367,160) (281,004) (3,306,986)
Liability in respect of prior
years, unallocated loss
adjustment expenses,
assumed business,
discount and risk
adjustment margin . . . . . . 22,285
Total net claim reserves
included in the
consolidated statements of
financial position . . . . . . . 241,564

(b) Financial risk

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises three types of risks, which arise
from foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices
(price risk).

(i) Currency risk

Currency risk is the risk that the fair value or future cash flow of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Group mainly operates in mainland China
and there is no significant currency risk except from foreign currency deposits.

(ii) Interest rate risk

Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate
instruments expose the Group to fair value interest risk.

— I-39 —
APPENDIX I ACCOUNTANT’S REPORT

The Group’s interest risk policy requires it to manage interest rate risk by maintaining an
appropriate match of fixed and variable rate instruments. The policy also requires it to manage the
maturity of interest-bearing financial assets and interest-bearing financial liabilities.

Sensitivities

The analysis below is performed for reasonably possible movements in interest rate with all other
variables held constant, for the following financial instruments, showing the pre-tax impact on profit
and equity. Since almost all financial instruments of the Group that bear interest rate risks are
financial instruments denominated in RMB, the sensitivity analysis below only shows the pre-tax
impact of RMB financial instruments on the Group’s profit before income tax and equity when RMB
interest rate changes.

Changes in RMB interest rate 31 December 2014

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5,095)
- 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5,407

Changes in RMB interest rate 31 December 2015

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (465) (67,794)
- 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 71,465

Changes in RMB interest rate 31 December 2016

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (460) (34,534)
- 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 36,439

Changes in RMB interest rate 31 March 2017

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (632) (14,760)
- 50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 15,901

— I-40 —
APPENDIX I ACCOUNTANT’S REPORT

(iii) Price risk

Equity price risk is the risk that the fair value of a financial instrument will fluctuate because
of changes in market prices (other than those arising from interest rate risk or currency risk), whether
those changes are caused by factors specific to the individual financial instrument or its issuer, or
factors affecting all similar financial instruments traded in the market.

Sensitivities

The analysis below is performed to show the reasonably possible movements in price with all
other assumptions held constant, showing the pre-tax impact on profit before income tax and total
equity of the Group when the price of all kinds of financial instruments vary.

Changes in price 31 December 2014

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,074 24,481
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,074) (24,481)

Changes in price 31 December 2015

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,070 243,910
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,070) (243,910)

Changes in price 31 December 2016

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,962 263,475
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (79,962) (263,475)

Changes in price 31 March 2017

Impact on profit Impact on total


before income tax equity

RMB’000 RMB’000
+ 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,712 242,864
- 5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,712) (242,864)

— I-41 —
APPENDIX I ACCOUNTANT’S REPORT

Credit risk

Credit risk refers to the risk that one side of the financial instrument cannot fulfill its obligations
and cause financial loss to the other party.

The Group’s credit risk is mainly associated with bank deposits, bond investments, premiums
receivable, reinsurance arrangements with reinsurance companies, securities purchased under
agreements to resell, investments classified as loans and receivables, and etc.

The Group’s bank deposits are mainly deposited in state-owned commercial banks and financial
institutions which are generally considered to be relatively stable. The Group considers that there is
no significant credit risk and does not generate any material losses due to the default of the other
parties.

As the Group’s investment types are limited by the China Insurance Regulatory Commission, the
Group’s debt-based investments mainly include government bonds and corporate bonds, etc. As at 31
March 2017, all corporate bonds and short-term corporate financing bonds held by the Group had
domestic credit rating AA and A-1 or above. The credit rating of the bond is provided by a qualified
assessment agency.

The Group’s premiums receivables mainly come from customers. The Group mitigates credit risk
by setting a shorter credit period or arranging the installment payment method. The Group regularly
evaluates the credit status of reinsurance companies and selects reinsurance companies with higher
credit qualifications to carry out reinsurance business.

The Group reduces credit risk by utilizing credit control policies, undertaking credit analysis on
potential investments, and imposing aggregate counterparty exposure limits. The Group determines
the amount and type of collateral required according to the credit risk assessment of the counterparty.

— I-42 —
APPENDIX I ACCOUNTANT’S REPORT

The following table shows the maximum credit risk exposure to assets in the balance sheet that
face credit risk. The maximum credit risk exposure is the amount prior to the consideration of the
guarantee or other credit enhancement methods.

As at 31 December 2014

Past due but not impaired

Neither
past due Total past
nor Less than More than due but not
impaired 1 year 1 year impaired Impaired Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Cash and short-term time
deposits . . . . . . . . . . . . . . 141,696 — — — — 141,696
Financial assets at fair value
through profit or loss . . . . 121,486 — — — — 121,486
Securities purchased under
agreements to resell . . . . . 50,000 — — — — 50,000
Premium receivables . . . . . . 21,621 — — — — 21,621
Reinsurance debtors . . . . . . . 534 — — — — 534
Interest receivables . . . . . . . 23,455 — — — — 23,455
Available-for-sale financial
assets . . . . . . . . . . . . . . . . 368,130 — — — — 368,130
Investments classified as
loans and receivables . . . . 408,299 — — — — 408,299
Restricted statutory deposits. 200,000 — — — — 200,000
Others . . . . . . . . . . . . . . . . . 3,507 — — — — 3,507
Total . . . . . . . . . . . . . . . . . . 1,338,728 — — — — 1,338,728

— I-43 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 December 2015

Past due but not impaired

Neither past Total past


due nor Less than More than due but not
impaired 1 year 1 year impaired Impaired Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Cash and short-term time
deposits . . . . . . . . . . . . . . 1,374,897 — — — — 1,374,897
Financial assets at fair value
through profit or loss . . . . 1,321,398 — — — — 1,321,398
Premium receivables . . . . . . 112,382 — — — — 112,382
Reinsurance debtors . . . . . . . 14,757 — — — — 14,757
Interest receivables . . . . . . . 98,294 — — — — 98,294
Available-for-sale financial
assets . . . . . . . . . . . . . . . . 3,556,804 — — — — 3,556,804
Investments classified as
loans and receivables . . . . 1,207,896 — — — — 1,207,896
Restricted statutory deposits. 248,125 — — — — 248,125
Others . . . . . . . . . . . . . . . . . 15,495 — — — — 15,495
Total . . . . . . . . . . . . . . . . . . 7,950,048 — — — — 7,950,048

As at 31 December 2016

Past due but not impaired

Neither past Total past


due nor Less than More than due but not
impaired 1 year 1 year impaired Impaired Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Cash and short-term time
deposits . . . . . . . . . . . . . . 1,153,244 — — — — 1,153,244
Financial assets at fair value
through profit or loss . . . . 1,599,230 — — — — 1,599,230
Securities purchased under
agreements to resell . . . . . 302,300 — — — — 302,300
Premium receivables . . . . . . 174,281 — — — 166 174,447
Reinsurance debtors . . . . . . . 10,838 — — — — 10,838
Interest receivables . . . . . . . 136,841 — — — — 136,841
Available-for-sale financial
assets . . . . . . . . . . . . . . . . 3,670,260 — — — — 3,670,260
Investments classified as
loans and receivables . . . . 1,707,648 — — — — 1,707,648
Restricted statutory deposits. 248,125 — — — — 248,125
Others . . . . . . . . . . . . . . . . . 29,459 — — — — 29,459
Total . . . . . . . . . . . . . . . . . . 9,032,226 — — — 166 9,032,392

— I-44 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 March 2017

Past due but not impaired

Neither past Total past


due nor Less than 1 More than 1 due but not
impaired year year impaired Impaired Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Cash and short-term time
deposits . . . . . . . . . . . . . . 1,054,646 — — — — 1,054,646
Financial assets at fair value
through profit or loss . . . . 1,694,232 — — — — 1,694,232
Securities purchased under
agreements to resell . . . . . 800 — — — — 800
Premium receivables . . . . . . 173,913 — — — — 173,913
Reinsurance debtors . . . . . . . 14,468 — — — — 14,468
Interest receivables . . . . . . . 87,243 — — — — 87,243
Available-for-sale financial
assets . . . . . . . . . . . . . . . . 3,163,042 — — — — 3,163,042
Investments classified as
loans and receivables . . . . 1,716,451 — — — — 1,716,451
Restricted statutory deposits. 248,125 — — — — 248,125
Others . . . . . . . . . . . . . . . . . 35,407 — — — — 35,407
Total . . . . . . . . . . . . . . . . . . 8,188,327 — — — — 8,188,327

Liquidity risk

The Group is exposed to liquidity risk on insurance products that permit surrenders, withdrawals
or other forms of early termination, benefits or claims of the insurance and other daily expenses. The
Group seeks to manage its liquidity risk by matching, to the extent possible, the duration of its
investment assets with the duration of its insurance products and ensuring that the Group is able to
meet its payment obligations and fund its lending and investment operations on a timely basis.

The following policies and procedures are in place to mitigate the Group’s exposure to liquidity
risk:

• Implementing liquidity risk policy by setting out the assessment and determination of what
constitutes liquidity risk for the Group. Compliance with the policy is monitored and
exposures and breaches are reported to the Group’s risk management committee. The policy
is regularly reviewed for pertinence and for changes in the risk environment.

• Setting out guidelines on asset allocations, portfolio limit structures and maturity profiles
of assets, in order to ensure that sufficient funding is available to meet insurance and
investment contract obligations.

• Setting up contingency funding plans which specify the minimum proportions of funds to
meet emergency calls as well as specifying events that would trigger such plans.

— I-45 —
APPENDIX I ACCOUNTANT’S REPORT

The tables below summarize the maturity profiles of the financial assets and financial liabilities
of the Group based on remaining undiscounted cash flows, and insurance contract liabilities of the
Group based on the estimated timing of the net cash outflows.

As at 31 December 2014

Within 1 Over 5
On demand year 1 to 5 years years Undated Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Assets:
Cash and short-term time
deposits . . . . . . . . . . . . . . 131,696 10,071 — — — 141,767
Financial assets at fair value
through profit or loss . . . . — — — — 121,486 121,486
Securities purchased under
agreements to resell . . . . . — 50,000 — — — 50,000
Premium receivables . . . . . . — 16,792 4,829 — — 21,621
Reinsurance debtors . . . . . . . — 534 — — — 534
Available-for-sale financial
assets . . . . . . . . . . . . . . . — 25,134 335,730 60,478 26,740 448,082
Investments classified as
loans and receivables . . . . — 327,340 67,528 51,904 — 446,772
Restricted statutory deposits. — — 252,250 — — 252,250
Other assets . . . . . . . . . . . . . — 7 3,500 — — 3,507
Total . . . . . . . . . . . . . . . . . . 131,696 429,878 663,837 112,382 148,226 1,486,019

Liabilities:
Securities sold under
agreements to repurchase . — 140,000 — — — 140,000
Reinsurance payables . . . . . . — 1,708 — — — 1,708
Other liabilities . . . . . . . . . . — 59,659 — — — 59,659
Total . . . . . . . . . . . . . . . . . . — 201,367 — — — 201,367

— I-46 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 December 2015

Within 1 Over 5
On demand year 1 to 5 years years Undated Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Assets:
Cash and short-term time
deposits . . . . . . . . . . . . . . 683,525 20,077 — — — 703,602
Financial assets at fair value
through profit or loss . . . . — 10,443 17,663 6,021 1,290,002 1,324,129
Premium receivables . . . . . . — 93,630 18,752 — — 112,382
Reinsurance debtors . . . . . . . — 14,757 — — — 14,757
Available-for-sale financial
assets . . . . . . . . . . . . . . . — 204,308 1,956,427 1,654,644 516,339 4,331,718
Investments classified as
loans and receivables . . . . — 448,676 557,523 501,596 — 1,507,795
Restricted statutory deposits. — — 306,475 — — 306,475
Other assets . . . . . . . . . . . . . — 160 15,336 — — 15,496
Total . . . . . . . . . . . . . . . . . . 683,525 792,051 2,872,176 2,162,261 1,806,341 8,316,354

Liabilities:
Securities sold under
agreements to repurchase . — 1,600 — — — 1,600
Investment contract
liabilities . . . . . . . . . . . . . — — 1,562 — — 1,562
Reinsurance payables . . . . . . — 5,545 — — — 5,545
Policyholders’ deposits . . . . — 12 — — — 12
Other liabilities . . . . . . . . . . — 367,331 — — 42,593 409,924
Total . . . . . . . . . . . . . . . . . . — 374,488 1,562 — 42,593 418,643

— I-47 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 December 2016

Within 1 Over 5
On demand year 1 to 5 years years Undated Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Assets:
Cash and short-term time
deposits . . . . . . . . . . . . . . 1,123,244 30,116 — — — 1,153,360
Financial assets at fair value
through profit or loss . . . . — 3,077 26,495 4,913 1,572,395 1,606,880
Securities purchased under
agreements to resell . . . . . — 302,300 — — — 302,300
Premium receivables . . . . . . — 112,961 61,486 — — 174,447
Reinsurance debtors . . . . . . . — 10,838 — — — 10,838
Available-for-sale financial
assets . . . . . . . . . . . . . . . . — 1,256,632 2,092,704 384,033 427,779 4,161,148
Investments classified as
loans and receivables . . . . — 419,699 1,201,376 429,800 — 2,050,875
Restricted statutory deposits. — — 306,475 — — 306,475
Other assets . . . . . . . . . . . . . — 4,528 24,931 — — 29,459
Total . . . . . . . . . . . . . . . . . . 1,123,244 2,140,151 3,713,467 818,746 2,000,174 9,795,782
Liabilities:
Securities sold under
agreements to repurchase . — 282,674 — — — 282,674
Investment contract
liabilities . . . . . . . . . . . . . — — 573,069 — — 573,069
Reinsurance payables . . . . . . — 33,999 — — — 33,999
Policyholders’ deposits . . . . — 211 — — — 211
Other liabilities . . . . . . . . . . — 515,843 — — 80,766 596,609
Total . . . . . . . . . . . . . . . . . . — 832,727 573,069 — 80,766 1,486,562

— I-48 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 March 2017

Within 1 Over 5
On demand year 1 to 5 years years Undated Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Assets:
Cash and short-term time
deposits . . . . . . . . . . . . . . 1,054,646 — — — — 1,054,646
Financial assets at fair value
through profit or loss . . . . — 1,322 29,457 8,695 1,660,635 1,700,109
Securities purchased under
agreements to resell . . . . . — 800 — — — 800
Premium receivables . . . . . . — 156,663 17,250 — — 173,913
Reinsurance debtors . . . . . . . — 14,468 — — — 14,468
Available-for-sale financial
assets . . . . . . . . . . . . . . . . — 1,713,826 1,062,537 138,175 487,386 3,401,924
Investments classified as
loans and receivables . . . . — 569,699 1,042,976 424,813 — 2,037,488
Restricted statutory deposits. — — 306,475 — — 306,475
Other assets . . . . . . . . . . . . . — 9,282 26,125 — — 35,407
Total . . . . . . . . . . . . . . . . . . 1,054,646 2,466,060 2,484,820 571,683 2,148,021 8,725,230

Liabilities:
Securities sold under
agreements to repurchase . — 2,300 — — — 2,300
Investment contract
liabilities . . . . . . . . . . . . . — — 137,196 — — 137,196
Reinsurance payables . . . . . . — 68,116 — — — 68,116
Policyholders’ deposits . . . . — 203 — — — 203
Other liabilities . . . . . . . . . . — 528,291 — — 105,046 633,337
Total . . . . . . . . . . . . . . . . . . — 598,910 137,196 — 105,046 841,152

Maximum exposure of structured entities

The Group uses structured entities in the normal course of business for a number of purposes,
for example, structured transactions for institutions, to provide finance to public and private section
infrastructure projects, and to generate fees from managing assets on behalf of third-party investors.
These structured entities are financed through the contracts.

The following table shows the total assets of the various types of unconsolidated structured
entities and the amount of funding provided by the Group to these unconsolidated structured entities.
The table also shows the Group’s maximum exposure to the unconsolidated structured entities
representing the Group’s maximum possible risk exposure that could occur as a result of the Group’s
arrangements with structured entities. The maximum exposure is contingent in nature and
approximates the sum of funding provided by the Group.

— I-49 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 March 2017, Group’s maximum exposure are shown below:

At 31 March

2017

RMB’000
Trust investment schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969,853
Wealth management products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,109,397
Investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,922
Unlisted equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,210,172

(c) Operational risk

Operational risk is the risk of loss arising from inadequacy or failure on business processes,
human error, information system failure, and etc. When controls fail to perform, operational risks can
cause damage to reputation, have legal or regulatory implications or can lead to financial losses.

The Group is exposed to many types of operational risks in the conduct of its business, from
inadequate or failure to obtain proper authorizations or supporting documentation to comply with
operational and informational security procedures that prevent frauds or errors by employees, payment
security, system attack and Trojan virus such information risks based on the Internet.

The Group cannot expect to eliminate all operational risks, but by initiating a rigorous control
framework and by monitoring and responding to potential risks, the Group is able to manage the risks.
Controls include effective segregation of duties, access controls, authorization and reconciliation
procedures, staff education and assessment processes, including the use of compliance check and
internal audit.

(d) Capital management risks

The capital demands of the Group is mainly based on the company size, types of debt business,
industry and geographic location. Further objectives are set by the Group to maintain a strong credit
rating and healthy solvency margin capital ratios in order to support its business objectives and
maximize shareholders’ value.

The Group manages its capital requirements by assessing shortfalls between reported and
required capital levels on a regular basis. The Group will adjust the capital level when the economic
condition and risk characteristics of the operating activities changes.

As at 31 December of 2014, 2015, 2016 and 31 March 2017, the Group was fully in compliance
with externally required capital requirement. The Group has formally implemented China Risk
Oriented Solvency System since 1 January 2016 by reference to the “Notice on the Formal
Implementation of China Risk Oriented Solvency System by CIRC”.

— I-50 —
APPENDIX I ACCOUNTANT’S REPORT

The table below summarizes the core capital, actual capital and minimum required capital of the
Company according to CIRC’s solvency rules.

Company At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Core capital . . . . . . . . . . . . . . . Not applicable Not applicable 6,705,039 6,442,715
Actual capital . . . . . . . . . . . . . 862,972 5,589,870 6,705,039 6,442,715
Minimum required capital . . . . 120,714 344,977 928,092 1,009,369
Core solvency margin ratio . . . Not applicable Not applicable 722% 638%
Comprehensive solvency
margin ratio . . . . . . . . . . . . . 715% 1,620% 722% 638%

According to the relevant regulations, if the actual solvency margin of an insurance company
falls below the minimum solvency margin, the CIRC may take additional necessary measures
depending on the circumstances, until the minimum solvency margin requirement is satisfied.

(e) Fair value measurement

Fair value estimates are made at a specific point in time based on relevant market information
and information about financial instruments. When an active market exists, such as an authorized
securities exchange, the market value is the best reflection of the fair values of financial instruments.
For financial instruments where there is no active market, fair value is determined using valuation
techniques (Note 4(e)).

The Group’s financial assets mainly include cash and short-term time deposits, financial assets
at fair value through profit or loss, available-for-sale financial assets, statutory deposits, and etc.

Determination of fair value and fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the consolidated
financial statements are categorised within the fair value hierarchies. The fair value hierarchy
prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The
level in the fair value hierarchy within which the fair value measurement is categorized in its entirety
is determined on the basis of the lowest level input that is significant to the fair value measurement
in its entirety.

The levels of the fair value hierarchy are as follows:

(a) Fair value is based on quoted prices (unadjusted) in active markets for identical assets or
liabilities (“Level 1”);

— I-51 —
APPENDIX I ACCOUNTANT’S REPORT

(b) Fair value is based on inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived
from prices) (“Level 2”); and

(c) Fair value is based on inputs for the asset or liability that are not based on observable
market data (unobservable inputs) (“Level 3”).

The level of fair value calculation is determined by the lowest level input with material
significant in the overall calculation. As such, the significance of the input should be considered from
an overall perspective in the calculation of fair value.

For Level 2 financial instruments, valuations are generally obtained from third party pricing
services for identical or comparable assets, or through the use of valuation methodologies using
observable market inputs, or recent quoted market prices. Valuation service providers typically gather,
analyze and interpret information related to market transactions and other key valuation model inputs
from multiple sources, and through the use of widely accepted internal valuation models, provide a
theoretical quote on various securities. Debt securities traded among Chinese interbank market are
classified as Level 2 when they are valued at recent quoted price from Chinese interbank market or
from valuation service providers. Substantially most financial instruments classified within Level 2 of
the fair value hierarchy are debt investments denominated in RMB. Fair value of debt investments
denominated in RMB is determined based upon the valuation results by the China Central Depository
& Clearing Co., Ltd. All significant inputs are observable in the market.

For Level 3 financial instruments, prices are determined using valuation methodologies such as
discounted cash flow models and other similar techniques. Determinations to classify fair value
measures within Level 3 of the valuation hierarchy are generally based on the significance of the
unobservable factors to the overall fair value measurement, and valuation methodologies such as
discounted cash flow models and other similar techniques. The Group’s valuation team may choose to
apply internally developed valuation method to the assets or liabilities being measured, determine the
main inputs for valuation, and analyse the change of the valuation and report it to management. Key
inputs involved in internal valuation services are not based on observable market data. They reflect
assumptions made by management based on judgements and experiences.

For assets and liabilities that are recognized at fair value on a recurring basis, the Group
determines whether transfers have occurred between Levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.

— I-52 —
APPENDIX I ACCOUNTANT’S REPORT

The following tables provide the fair value measurement hierarchy of the Group’s financial
assets and liabilities:

As at 31 December 2014

Level 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000


Assets measured at fair value
Financial assets at fair value
through profit or loss
ⳮ Equity investments. . . . . . 54,007 — — 54,007
ⳮ Fund investments . . . . . . . 67,479 — — 67,479
Available-for-sale financial
assets
ⳮ Fund investments . . . . . . . 26,740 — — 26,740
ⳮ Debt investments . . . . . . . 341,390 — — 341,390
489,616 — — 489,616

Assets for which fair values


are disclosed
Investments classified as loans
and receivables . . . . . . . . . . . — — 408,299 408,299

As at 31 December 2015

Level 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000


Assets measured at fair value
Financial assets at fair value
through profit or loss
ⳮ Equity investments. . . . . . 1,284,733 — — 1,284,733
ⳮ Fund investments . . . . . . . 5,269 — — 5,269
ⳮ Debt investments . . . . . . . 31,396 — — 31,396
Available-for-sale financial
assets
ⳮ Fund investments . . . . . . . 491,339 — — 491,339
ⳮ Debt investments . . . . . . . 919,511 2,120,954 — 3,040,465
2,732,248 2,120,954 — 4,853,202

Assets for which fair values


are disclosed
Investments classified as loans
and receivables . . . . . . . . . . . — — 1,207,896 1,207,896

— I-53 —
APPENDIX I ACCOUNTANT’S REPORT

As at 31 December 2016

Level 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000


Assets measured at fair value
Financial assets at fair value
through profit or loss
ⳮ Equity investments. . . . . . 1,491,395 — — 1,491,395
ⳮ Fund investments . . . . . . . 17,792 — — 17,792
ⳮ Debt investments . . . . . . . 26,835 — — 26,835
ⳮ Wealth management
products . . . . . . . . . . . . . . — 63,208 — 63,208
Available-for-sale financial
assets
ⳮ Fund investments . . . . . . . 402,779 — — 402,779
ⳮ Debt investments . . . . . . . 903,251 2,339,230 — 3,242,481
2,842,052 2,402,438 — 5,244,490

Assets for which fair values


are disclosed
Investments classified as loans
and receivables . . . . . . . . . . . — — 1,707,648 1,707,648

As at 31 March 2017

Level 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000


Assets measured at fair value
Financial assets at fair value
through profit or loss
- Equity investments . . . . . . . 1,654,300 — — 1,654,300
- Fund investments . . . . . . . . 6,335 — — 6,335
- Debt investments . . . . . . . . 33,597 — — 33,597
Available-for-sale financial
assets
- Fund investments . . . . . . . . 99,587 — — 99,587
- Debt investments . . . . . . . . 630,714 2,044,942 — 2,675,656
- Wealth management
products . . . . . . . . . . . . . . — 362,799 — 362,799
2,424,533 2,407,741 — 4,832,274

Assets for which fair values


are disclosed
Investments classified as loans
and receivables . . . . . . . . . . . — — 1,716,451 1,716,451

— I-54 —
APPENDIX I ACCOUNTANT’S REPORT

Valuation techniques

The fair value of the unquoted debt investments is estimated by discounting future cash flows
using rates currently available for debt on similar terms, credit risk and remaining maturities, with
appropriate adjustment where applicable.

The fair value of the unquoted equity investments has been determined using valuation
techniques such as comparable company valuation multiples, recent transaction prices of the same or
similar instruments, with appropriate adjustments have been made where applicable, for example, for
lack of liquidity using option pricing models. The valuation requires management to make certain
assumptions about unobservable inputs to the model, which mainly include historical volatility and
estimated time period prior to the listing of the unquoted equity instruments, etc. The fair value of the
unquoted equity investments is not significantly sensitive to a reasonable change in these
unobservable inputs.

5. SUBSIDIARIES

(a) The Company’s subsidiaries as at 31 March 2017 are as follows:

Percentage
of
equity/voting
rights
Registered attributable
Place of capital to the Acquisition
Name operations Place of incorporation/registration Nature of business (RMB’000) Company Mode

ZhongAn information Shanghai No. 201, Tower A, No. 1 Qianwan Yi Technology Development/ 500,000 100% Set-up
Technology Services Road, Qianhai shenzheng Hongkong Technology Consulting
Limited Company(“Zhong Cooperation District, Shenzhen
An Information”) . . . . .
Hangzhou Qi Hui Internet Hangzhou No. 487, Floor 4, Block 3, Tower A, Technology Development/ 3,000 100% Equity
Technology Limited No. 301 Bingxing Road, Changhe Avenue, Technology Consulting Purchase
Company (“Hangzhou Bingjiang District,Hangzhou
Qihui”) . . . . . . . . .
Shanghai Yuan Bao Internet Shanghai No. 1360, Floor 1, Block 8, No. 33 Technology Development/ 10,000 60% Set-up
Technology Limited Guangshun Road, Changning District, Technology Consulting
Company (“Shanghai Yuan Shanghai
Bao”) . . . . . . . . . .
Beijing Youwozai Technology Beijing No. 259, Floor 4, Block D, Tower 24, Technology Development/ 1,000 60% Set-up
Co., Ltd (“Beijing No. 68, Beijing Road, Haidian District, Technology Consulting
Youwozai”) . . . . . . . Beijing

(a) On 7 July 2016, the Company set up ZhongAn Information, whose registered capital is RMB500,000 thousand. The
Company holds 100% of the voting rights in ZhongAn Information.

(b) On 28 October 2016, ZhongAn Information acquired Hangzhou Qihui at a price of RMB1,200 thousand. The difference
between fair value of net identifiable assets of Hangzhou Qihui and the acquisition price has been recognised as goodwill
in the consolidated statements of financial position, amounting to RMB1,047 thousand. When estimating the goodwill
impairment, management budgeting and future profit forecast has been taken into consideration. After the Group’s
assessment, no impairment provision allowance has been provided.

— I-55 —
APPENDIX I ACCOUNTANT’S REPORT

(c) On 18 November 2016, ZhongAn Information set up Shanghai Yuan Bao, whose registered capital is RMB10,000
thousand. After this transaction, ZhongAn Information holds 60% of the voting rights of Shanghai Yuan Bao.

(d) On 8 February 2017, ZhongAn Information set up Beijing Youwozai, whose registered capital is RMB1,000 thousand.
After this transaction, ZhongAn Information holds 60% of the voting rights of Beijing Youwozai.

(b) As at 31 March 2017, consolidated structured entities material to the Group are as
followings:

Holding by the Total Subscription


Name Company (%) (RMB’000) Principal activities

ZhongAn Le Xiang No.1 Asset 100% 5,570,379 Asset Management


Management Plan (Zhong An Le Xiang Product
No.1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
ZhongAn Zhong Yin No.1 Asset 100% 30,000 Asset Management
Management Plan (Zhong An Zhong Yin Product
No.1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Zhong An Zhong Yin No.2 Asset 100% 50,000 Asset Management
Management Plan (Zhong An Zhong Yin Product
No.2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
ZhongAn Zhong Yin No.3 Asset 100% 1,404 Asset Management
Management Plan (Zhong An Zhong Yin Product
No.3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
ZhongAn Insurance Investment Product of 100% 30,198 Asset Management
Aviation Comprehensive Insurance (one Product
year) Asset Management Plan(Zhao
Shang Funds Asset Management Plan) . .

6. NET PREMIUMS EARNED

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Gross written premiums (a) 794,097 2,283,042 3,408,048 604,401 1,030,363
ⳮ Short-term life insurance
written premiums . . . . . . . . . 44,404 296,167 1,187,242 193,431 466,563
ⳮ Property and casualty
insurance written premiums . . 749,693 1,986,875 2,220,806 410,970 563,800
Less: Premiums ceded to
reinsurers (b) . . . . . . . . . . . . (7,265) (10,443) (39,632) (3,516) (35,954)
Net written premiums . . . . . . . . . . 786,832 2,272,599 3,368,416 600,885 994,409
Less: Net change in unearned
premium reserves . . . . . . . . . (74,647) (351,105) (143,004) (31,706) (107,632)
Net premiums earned . . . . . . . . . 712,185 1,921,494 3,225,412 569,179 886,777

— I-56 —
APPENDIX I ACCOUNTANT’S REPORT

(a) Gross written premiums

This represents gross premium income from direct insurance business, breakdown by line of
product is as follows:

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Accident insurance . . . . . . . . . . . . 44,391 282,783 982,228 182,519 311,682
Bond insurance . . . . . . . . . . . . . . . 108,929 453,290 517,613 108,808 84,208
Health insurance . . . . . . . . . . . . . . 13 13,384 205,014 10,912 154,881
Liability insurance . . . . . . . . . . . . 15,993 81,209 185,097 35,082 82,582
Credit insurance . . . . . . . . . . . . . . 4,003 51,728 102,826 24,904 46,762
Cargo insurance . . . . . . . . . . . . . . — 15,682 59,304 5,322 18,343
Household property insurance . . . . 4,555 33,762 15,464 1,732 10,448
Others . . . . . . . . . . . . . . . . . . . . . . 616,213 1,351,204 1,340,502 235,122 321,457
794,097 2,283,042 3,408,048 604,401 1,030,363

Others primarily is consisted of shipping return insurance, which generated gross written
premiums of RMB613,145 thousand, RMB1,298,219 thousand, RMB1,193,562 thousand,
RMB206,092 thousand and RMB257,814 thousand, in the years ended 31 December 2014, 2015, 2016
and the three months ended 31 March 2016 and 2017.

(b) Premiums ceded to reinsurers

Three months ended 31


Year ended 31 December March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Accident insurance . . . . . . . . . . . . 323 3,801 7,192 1,621 8,523
Health insurance . . . . . . . . . . . . . . — 1,355 30,373 1,771 26,967
Liability insurance . . . . . . . . . . . . 4,460 4,446 680 31 292
Cargo insurance . . . . . . . . . . . . . . — — 1,362 69 172
Household property insurance . . . . 28 — 1 — —
Others . . . . . . . . . . . . . . . . . . . . . . 2,454 841 24 24 —
7,265 10,443 39,632 3,516 35,954

— I-57 —
APPENDIX I ACCOUNTANT’S REPORT

7. NET INVESTMENT INCOME

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Interest income
ⳮ Bank deposits . . . . . ..... .. 11,299 28,058 20,268 2,379 4,320
ⳮ Bond investments . . ..... .. 29,587 78,647 139,610 35,222 32,059
ⳮ Securities purchased under
agreements to resell . ..... .. 343 4,141 12,191 2,865 1,914
ⳮTrust investment . . . . ..... .. 5,194 35,440 86,493 18,468 23,338
Dividend income
ⳮ Fund investment . . . ....... 14,221 11,149 17,599 5,525 95,719
ⳮ Equity investment . . ....... 439 780 6,874 — —
Realized gain/(loss), net . ....... 18,979 362,469 (184,411) (231,552) (61,798)
80,062 520,684 98,624 (167,093) 95,552

8. NET FAIR VALUE GAINS THROUGH PROFIT OR LOSS

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Financial assets designated at fair
value through profit or loss
ⳮ Equity investments . . . . .... 9,752 39,735 42,829 (51,597) (95,800)
ⳮ Fund investments . . . . . .... 162 (149) (1) (28) (332)
ⳮ Debt investments. . . . . . .... — 1,025 (962) (810) (446)
ⳮ Wealth management
products . . . . . . . . . . . . . .... — — (23) — 23
9,914 40,611 41,843 (52,435) (96,555)

— I-58 —
APPENDIX I ACCOUNTANT’S REPORT

9. OTHER OPERATING INCOME

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Advisory income (b) . . . . . . . . . . . — — — — 8,955
Government grants (a) . . . . . . . . . . 15,376 26,525 46,476 111 158
Others . . . . . . . . . . . . . . . . . . . . . . — 31 365 93 1,007
15,376 26,556 46,841 204 10,120

(a) Government grants include rental subsidies, development support funds and government subsidies related to intangible
assets, and etc.
(b) The Group enters into technical service income arrangements with Ping An Property & Casualty Insurance Co. Ltd. The
Group periodically settles technical service fee based on the provisions of the contact.

10. NET CLAIMS INCURRED

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Insurance claims paid (a) . . . . ... 491,082 1,193,241 1,340,774 247,357 351,883
ⳮ Short-term life insurance
claims paid . . . . . . . . . . . . ... 2,012 20,241 113,330 15,913 49,721
ⳮ Property and casualty
insurance claims paid . . . ... 489,070 1,173,000 1,227,444 231,444 302,162
Less: Claims paid ceded to
reinsurers (b) . . . . . . . . . ... (542) (16,244) (7,303) (3,031) (2,491)
Net claims paid . . . . . . . . . . . . . . . 490,540 1,176,997 1,333,471 244,326 349,392
Add: Net change in insurance
contract liabilities . . . . . . . . . 32,363 139,272 21,822 21,229 47,321
522,903 1,316,269 1,355,293 265,555 396,713

— I-59 —
APPENDIX I ACCOUNTANT’S REPORT

(a) Insurance claims paid

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Liability insurance . . . . . . . . . . . . 1,883 61,101 124,375 25,087 23,235
Bond insurance . . . . . . . . . . . . . . . 17,330 96,469 85,238 21,280 33,138
Accident insurance . . . . . . . . . . . . — 17,740 79,026 14,050 22,590
Health insurance . . . . . . . . . . . . . . 2 2,501 34,304 1,863 27,131
Credit insurance . . . . . . . . . . . . . . 147 1,126 27,736 19,702 31,633
Cargo insurance . . . . . . . . . . . . . . — 992 16,734 1,141 10,690
Household property insurance . . . . 833 14,775 4,707 2,098 579
Others . . . . . . . . . . . . . . . . . . . . . . 470,887 998,537 968,654 162,136 202,887
491,082 1,193,241 1,340,774 247,357 351,883

Others primarily is consisted of shipping return insurance, which generated insurance claims
incurred of RMB470,879 thousand, RMB981,109 thousand, RMB886,955 thousand, RMB144,554
thousand and RMB178,060 thousand in year 2014, 2015, 2016 and the three months ended 31 March
2016 and 2017.

(b) Claims paid ceded to reinsurers

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Liability insurance . . . . . . . . . . . . 512 15,490 6,432 3,031 —
Health insurance . . . . . . . . . . . . . . — 151 774 — 1,602
Accident insurance . . . . . . . . . . . . — 10 97 — 889
Household property insurance . . . . 25 — — — —
Others . . . . . . . . . . . . . . . . . . . . . . 5 593 — — —
542 16,244 7,303 3,031 2,491

— I-60 —
APPENDIX I ACCOUNTANT’S REPORT

11. HANDLING CHARGES AND COMMISSIONS

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Handling charges and commissions
before reinsurance arrangement . 17,766 102,333 288,423 44,887 118,132

Less: Reinsurance expense


recovered . . . . . . . . . . . . . . . . . . (1,612) (1,692) (1,314) (287) (2,667)
Handling charges and
commissions . . . . . . . . . . . . . . . 16,154 100,641 287,109 44,600 115,465

12. EXPENSES BY NATURE

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Consulting fee and service charge
(a) . . . . . . . . . . . . . . . . . . . . . . . 94,462 590,629 1,092,868 201,381 338,061
Taxes and surcharges. . . . . . . . . . . 44,866 128,993 63,686 34,562 3,381
Employee benefit expense . . . . . . . 42,021 185,676 302,547 49,058 134,385
Rental fee . . . . . . . . . . . . . . . . . . . 11,461 24,687 53,542 10,451 22,032
Depreciation of property, plant
and equipment . . . . . . . . . . . . . . 3,366 5,179 7,952 1,680 3,250
Amortisation of intangible assets. . 871 3,302 17,425 2,305 10,733
Auditors’ remuneration . . . . . . . . . 454 570 1,948 200 717
Other . . . . . . . . . . . . . . . . . . . . . . 38,693 90,728 217,132 33,598 93,416
236,194 1,029,764 1,757,100 333,235 605,975

The research and development expenses mainly are the employee benefit expenses of research
and development staff and consulting fee and service charge paid to IT vendors by the Group. In the
years ended December 31, 2014, 2015 and 2016, and the three months ended 31 March 2016 and 2017,
the research and development expenses were RMB15,155 thousand, RMB36,149 thousand,
RMB94,038 thousand, RMB22,471 thousand and RMB55,016 thousand, respectively.

(a) The Group enters into technical service fee arrangements with different counterparties, with the related technical service
fee being determined based on the customer volume introduced by the counterparties. As the main operating costs, the
Group periodically settles technical service fee based on the provisions of the contracts.

— I-61 —
APPENDIX I ACCOUNTANT’S REPORT

13. EMPLOYEE BENEFIT EXPENSE (INCLUDING DIRECTORS’ AND SUPERVISORS’


EMOLUMENTS)

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Salaries, allowances and other
short-term benefits . . . ........ 37,505 141,259 240,784 34,483 105,064
Contributions to defined
contribution plans (a). ........ 4,516 16,470 55,131 12,417 28,230
Share-based payments . . ........ — 27,947 6,632 2,158 1,091
42,021 185,676 302,547 49,058 134,385

(a) Contributions to defined contribution plans mainly include contributions made to the state pension schemes.

14. DIRECTORS’ AND SUPERVISORS’ REMUNERATION

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Salaries, allowances and other
short-term benefits . . . ........ 1,568 2,001 1,913 451 569
Contributions to defined
contribution plans . . . ........ 111 155 160 40 21
Share-based payments . . ........ — 4,688 1,334 456 242
1,679 6,844 3,407 947 832

— I-62 —
APPENDIX I ACCOUNTANT’S REPORT

(a) Independent non-executive directors

Year ended 31 December 2014

Other social
security costs,
Pension costs — housing benefits
defined and other
Wages, salaries contribution employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


ZHENG Fang (鄭方) . 63 — — — 63
YU Feng 1 (虞鋒) . . . . 63 — — — 63
ZHANG Shuang 2
(張爽) . . . . . . . . . . — — — — —
126 — — — 126

1.
Resign from Independent non-executive director since August 2014
2.
Independent non-executive director since November 2014

Year ended 31 December 2015

Other social
security costs,
Pension costs — housing benefits
defined and other
Wages, salaries contribution employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


ZHANG Shuang
(張爽) . . . . . . . . . . — — — — —
ZHENG Fang (鄭方) . — — — — —
— — — — —

— I-63 —
APPENDIX I ACCOUNTANT’S REPORT

Year ended 31 December 2016

Other social
security costs,
Pension costs — housing benefits
defined and other
Wages, salaries contribution employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


ZHANG Shuang
(張爽) . . . . . . . . . . 63 — — — 63
ZHENG Fang (鄭方) . 62 — — — 62
CHEN Hui 1 (陳慧). . . — — — — —
DU Li 1 (杜力) . . . . . . — — — — —
LI YIFAN 1 . . . . . . . . . — — — — —
125 — — — 125

1.
Independent non-executive director since December 2016

Three months ended 31 March 2016 (Unaudited)

Other social
security costs,
Pension costs — housing benefits
defined and other
Wages, salaries contribution employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


ZHANG Shuang
(張爽) . . . . . . . . . . 16 — — — 16
ZHENG Fang (鄭方) . 15 — — — 15
31 — — — 31

— I-64 —
APPENDIX I ACCOUNTANT’S REPORT

Three months ended 31 March 2017

Other social
security costs,
Pension costs — housing benefits
defined and other
Wages, salaries contribution employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


ZHANG Shuang
(張爽) . . . . . . . . . . 31 — — — 31
CHEN Hui 1 (陳慧). . . 31 — — — 31
DU Li 1 (杜力) . . . . . . 31 — — — 31
LI YIFAN 1 . . . . . . . . . 31 — — — 31
ZHENG Fang (鄭方) . 11 — — — 11
135 — — — 135

1.
Resign from Independent non-executive director since March 2017.

(b) Executive directors and non-executive directors

Year ended 31 December 2014

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Executive directors:
CHEN Jin 1 (陳勁) . . . . . . 1,159 22 22 — 1,203
YIN Hai 2 (尹海) . . . . . . . — — — — —
Non-executive directors:
OU Yaping (歐亞平) . . . — — — — —
PENG Lei (彭蕾) . . . . . . — — — — —
LAI Chi Ming,
Jimmy (賴智明) . . . . . — — — — —
LU Yue (盧躍) . . . . . . . . — — — — —
HU Xiaoming (胡曉明) . . — — — — —
CAI Zhaohui (蔡朝暉) . . — — — — —
FENG Yan (馮雁) . . . . . . — — — — —
LI Fujun (李福軍). . . . . . — — — — —
1,159 22 22 — 1,203

1.
Executive director since November 2014
2.
Resign from Executive director since August 2014

— I-65 —
APPENDIX I ACCOUNTANT’S REPORT

Year ended 31 December 2015


Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
CHEN Jin (陳勁) . . . . . . 1,778 41 40 4,562 6,421
Non-executive directors:
OU Yaping (歐亞平) . . . . — — — — —
PENG Lei (彭蕾) . . . . . . — — — — —
LAI Chi Ming,
Jimmy (賴智明) . . . . . — — — — —
LU Yue (盧躍) . . . . . . . . — — — — —
HU Xiaoming (胡曉明) . . — — — — —
CAI Zhaohui (蔡朝暉) . . — — — — —
FENG Yan (馮雁) . . . . . . — — — — —
LI Fujun (李福軍). . . . . . — — — — —
1,778 41 40 4,562 6,421

Year ended 31 December 2016


Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
CHEN Jin (陳勁) . . . . . . 1,500 42 40 1,332 2,914
Non-executive directors:
OU Yaping (歐亞平) . . . — — — — —
PENG Lei (彭蕾) . . . . . . — — — — —
LAI Chi Ming,
Jimmy (賴智明) . . . . . — — — — —
LU Yue (盧躍) . . . . . . . . — — — — —
HU Xiaoming (胡曉明) . . — — — — —
CAI Zhaohui (蔡朝暉) . . — — — — —
FENG Yan (馮雁) . . . . . . — — — — —
LI Fujun (李福軍). . . . . . — — — — —
HAN Xinyi 2 (韓歆毅) . . . — — — — —
WANG Guoping 3
(王國平) . . . . . . . . . . . — — — — —
1,500 42 40 1,332 2,914

1.
Resign from non-executive director since November 2016
2.
Non-executive director since November 2016
3.
Non-executive director since December 2016

— I-66 —
APPENDIX I ACCOUNTANT’S REPORT

Three months ended 31 March 2016 (Unaudited)

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Executive directors:
CHEN Jin (陳勁) . . . . . . 375 10 10 454 849
Non-executive directors:
OU Yaping (歐亞平) . . . — — — — —
PENG Lei (彭蕾) . . . . . . — — — — —
LAI Chi Ming,
Jimmy (賴智明) . . . . . — — — — —
LU Yue (盧躍) . . . . . . . . — — — — —
HU Xiaoming (胡曉明) . . — — — — —
CAI Zhaohui (蔡朝暉) . . — — — — —
FENG Yan (馮雁) . . . . . . — — — — —
LI Fujun (李福軍). . . . . . — — — — —
375 10 10 454 849

Three months ended 31 March 2017

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Executive directors:
CHEN Jin (陳勁) . . . . . . 400 11 10 242 663
Non-executive directors:
OU Yaping (歐亞平) . . . — — — — —
LAI Chi Ming,
Jimmy (賴智明) . . . . . — — — — —
HU Xiaoming (胡曉明) . . — — — — —
HAN Xinyi (韓歆毅). . . . — — — — —
WANG Guoping
(王國平) . . . . . . . . . . . 16 — — — 16
ZHENG Fang 1 (鄭方) . . . 5 — — — 5
421 11 10 242 684

1.
Non-executive director since March 2017

— I-67 —
APPENDIX I ACCOUNTANT’S REPORT

(c) Supervisors

Year ended 31 December 2014

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


1
DING Jin (丁晉) . . . . . . . . 283 30 37 — 350
WEN Yuping (溫玉萍) . . . . — — — — —
GAN Baoyan 2 (干寶雁) . . . — — — — —
ZHANG Shuang 3 (張爽) . . . — — — — —
283 30 37 — 350

1.
Supervisor since February 2014
2.
Supervisor since November 2014
3.
Resign from supervisor since August 2014

Year ended 31 December 2015

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


DING Jin (丁晉) . . . . . . . . 223 34 40 126 423
WEN Yuping (溫玉萍) . . . . — — — — —
GAN Baoyan (干寶雁) . . . . — — — — —
223 34 40 126 423

— I-68 —
APPENDIX I ACCOUNTANT’S REPORT

Year ended 31 December 2016

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


DING Jin (丁晉) . . . . . . . . 288 35 43 2 368
WEN Yuping (溫玉萍) . . . . — — — — —
GAN Baoyan (干寶雁) . . . . — — — — —
288 35 43 2 368

Three months ended 31 March 2016 (Unaudited)

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


DING Jin (丁晉) . . . . . . . . 45 9 11 2 67
WEN Yuping (溫玉萍) . . . . — — — — —
GAN Baoyan (干寶雁) . . . . — — — — —
45 9 11 2 67

Three months ended 31 March 2017

Other social
security costs,
Pension costs housing
— defined benefits and
Wages, salaries contribution other employee Share-based
and bonuses plans benefits payments Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


WEN Yuping (溫玉萍) . . . . 7 — — — 7
GAN Baoyan (干寶雁) . . . . 6 — — — 6
13 — — — 13

There was no payment of their other services in connection with the management of the affairs
of the company or its subsidiary undertaking during the years ended 31 December 2014, 2015, 2016
and the three months ended 31 March 2016 and 2017.

— I-69 —
APPENDIX I ACCOUNTANT’S REPORT

15. FIVE HIGHEST PAID INDIVIDUALS

The number of highest paid non-director individuals whose remuneration fell within the
following bands is set out below:

Three months ended


Year ended 31 December 31 March
2014 2015 2016 2016 2017
(Unaudited)
Nil to RMB1,000,000 . . . . . . . . . . 4 — — 5 5
RMB1,000,001 to RMB2,000,000 . 1 2 2 — —
RMB2,000,001 to RMB3,000,000 . — — 3 — —
RMB3,000,001 to RMB4,000,000 . — 1 — — —
RMB5,000,001 to RMB6,000,000 . — 2 — — —
Total . . . . . . . . . . . . . . . . . . . . . . . 5 5 5 5 5

Details of the remuneration of the highest paid non-director individuals are as follows:

Three months ended


Year ended 31 December 31 March
2014 2015 2016 2016 2017
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, allowances and other
short-term benefits . . . . . . . . . . . 4,453 5,043 6,104 1,525 1,554
Contributions to defined
contribution plans. . . . . . . . . . . . 373 403 409 103 84
Share-based payments . . . . . . . . . . — 11,751 3,068 1,032 517
4,826 17,197 9,581 2,660 2,155
The number of non-director
individuals for the above
remuneration . . . . . . . . . . . . . . . 5 5 5 5 5

16. INCOME TAX EXPENSE

(a) Income tax expense

Three months ended


Year ended 31 December 31 March
2014 2015 2016 2016 2017
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current income tax . . . . . . . . . . . . — — — — —
Deferred income tax (Note 30) . . . (397) 15,336 3,643 (38,307) (20,608)
(397) 15,336 3,643 (38,307) (20,608)

— I-70 —
APPENDIX I ACCOUNTANT’S REPORT

(b) Reconciliation of tax expense

A reconciliation of the tax expense applicable to profit before income tax using the PRC statutory
income tax rate of 25% to the tax expense at the Group’s effective tax rate is as follows:

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Profit/(loss) before income tax. . . . 36,584 59,593 13,015 (293,692) (222,704)

Tax computed at the statutory tax


rate . . . . . . . . . . . . . . . . . . . . . . 9,146 14,898 3,254 (73,423) (55,676)
Adjustments to income tax in
respect of previous periods. . . . . — — — — (9,074)
Income not subject to tax (i) . . . . . . (3,349) (239) (48) (10) (23,929)
Expenses not deductible for tax . . . 333 677 437 125 273
Recognition of unrecognized prior
years deductible temporary
differences . . . . . . . . . . . . . . . . . (6,527) — — — —
Tax losses for which no deferred
tax asset was recognised. . . . . . . — — — 35,001 67,798
Income tax expense at the Group’s
effective rate . . . . . . . . . . . . . . . (397) 15,336 3,643 (38,307) (20,608)

(i) The income not subject to tax are dividends received from investment funds held by the Group.

17. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net profit for the year/period by the weighted
average number of shares in issue during the year/period. Diluted earnings per share is calculated by
adjusting the weighted average number of shares outstanding to assume conversion of all dilutive
potential shares.

— I-71 —
APPENDIX I ACCOUNTANT’S REPORT

The calculation of earnings per share is based on the following:

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Net profit/(loss) for the
year/period . . . . . . . . . . . . . . . . 36,981 44,257 9,372 (255,385) (202,096)
Weighted average number of
shares in issue (in thousand) . . . 1,000,000 1,160,417 1,240,625 1,240,625 1,240,625
Basic earnings/(loss) per share
(RMB yuan) . . . . . . . . . . . . . . . . 0.04 0.04 0.01 (0.21) (0.16)

Diluted earnings/(loss) per share


(RMB yuan) . . . . . . . . . . . . . . . . 0.04 0.04 0.01 (0.21) (0.16)

The Company had no dilutive potential shares as at 31 December 2014 , 2015, 2016 and 31
March 2017.

18. OTHER COMPREHENSIVE INCOME/(LOSS)

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Available-for-sale financial assets
Fair value change on
available-for-sale financial
assets . . . . . . . . . . . . . . . . . . . 5,466 93,794 (25,200) 15,365 3,093
Reclassification adjustments for
amounts transferred to profit
or loss . . . . . . . . . . . . . . . . . . — (1,721) (48,600) (19,429) (18,729)
Income tax expense relating to
available-for-sale financial
assets . . . . . . . . . . . . . . . . . . . . . (1,367) (23,018) 18,450 1,016 3,909
Other comprehensive
income/(loss) . . . . . . . . . . . . . . . 4,099 69,055 (55,350) (3,048) (11,727)

— I-72 —
APPENDIX I ACCOUNTANT’S REPORT

19. CASH AND CASH EQUIVALENTS

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Cash at banks and on hand . . . — — — —
Time deposits with original
maturity of no more than
three months . . . . . . . . . . . . . 113,534 1,285,772 1,034,881 930,095
Other monetary assets (a). . . . . 28,162 89,125 118,363 124,551
141,696 1,374,897 1,153,244 1,054,646

The Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Cash at banks and on hand . . . — — — —
Time deposits with original
maturity of no more than
three months . . . . . . . . . . . . . 105,987 682,706 666,493 364,040
Other monetary assets (a). . . . . 23,865 20,918 92,934 105,672
129,852 703,624 759,427 469,712

(a) Other monetary assets refer to funds deposited by the Group for daily business operations and investment activities.

— I-73 —
APPENDIX I ACCOUNTANT’S REPORT

20. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

All the Group’s financial assets at fair value through profit or loss are as follows:

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Listed
ⳮ Equity investments. . . . . . 54,007 1,284,733 1,491,395 1,654,300
ⳮ Debt investments . . . . . . . — 31,396 26,835 33,597
ⳮ Fund investments . . . . . . . — 2,677 9,833 3,658
Unlisted
ⳮ Fund investments . . . . . . . 67,479 2,592 7,959 2,677
ⳮ Wealth management
products . . . . . . . . . . . . . . — — 63,208 —
121,486 1,321,398 1,599,230 1,694,232

All the Company’s financial assets at fair value through profit or loss are as follows:

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Unlisted
ⳮ Fund investments . . . . . . . 67,479 2,592 2,656 2,677
ⳮ Wealth management
products . . . . . . . . . . . . . . — — 61,232 —
67,479 2,592 63,888 2,677

Changes in fair values of financial assets at fair value through profit or loss are recorded in ‘Net
fair value gains through profit or loss’ in the income statement.

21. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Securities - bonds
ⳮ Traded in stock exchange . 50,000 — 302,300 800
50,000 — 302,300 800

— I-74 —
APPENDIX I ACCOUNTANT’S REPORT

22. INTEREST RECEIVABLES

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Interest receivables from bank
deposits . . . . . . . . . . . . . . . . 12,170 23,608 36,167 39,444
Interest receivables from debt
investments. . . . . . . . . . . . . . 9,978 72,670 80,280 42,920
Interest receivables from trust
investment scheme . . . . . . . . 1,307 2,016 20,388 4,879
Interest receivables from
securities purchased under
agreements to resell . . . . . . . — — 6 —
23,455 98,294 136,841 87,243

The Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Interest receivables from bank
deposits . . . . . . . . . . . ..... 12,168 23,527 36,084 39,317
Interest receivables from debt
investments. . . . . . . . . ..... — 31 13,118 —
Interest receivables from trust
investment scheme . . . ..... — — 214 —
12,168 23,558 49,416 39,317

23. PREMIUMS RECEIVABLES

The Group and the Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Premium receivables . . . . . . . . 21,621 112,382 174,447 173,913
Provision for impairment of
insurance receivables . . . . . . — — (166) —
21,621 112,382 174,281 173,913

— I-75 —
APPENDIX I ACCOUNTANT’S REPORT

An aged analysis of the premiums receivables is as follows:

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Within 3 months (including 3
months) . . . . . . . . . . . . . . . . 21,002 98,546 126,060 139,290
Over 3 months and within 1
year (including 1 year) . . . . . 619 11,979 44,863 28,746
Over 1 year . . . . . . . . . . . . . . . — 1,857 3,358 5,877
21,621 112,382 174,281 173,913

24. REINSURANCE DEBTORS

The Group and the Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Reinsurance debtors . . . . . . . . . 534 14,757 10,838 14,468
Provision for impairment of
insurance receivables . . . . . . — — — —
534 14,757 10,838 14,468

An aged analysis of reinsurance debtors is as follows:

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Within one year . . . . . . . . . . . . 534 14,429 7,459 9,417
Over one year . . . . . . . . . . . . . — 328 3,379 5,051
534 14,757 10,838 14,468

— I-76 —
APPENDIX I ACCOUNTANT’S REPORT

25. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets are stated at fair value and comprise the following:

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Listed
ⳮ Debt investments . . . . . . . . . . . . . . . 341,390 919,511 903,251 630,714
ⳮ Fund investments . . . . . . . . . . . . . . . 26,740 15,339 80 88

Unlisted
ⳮ Debt investments . . . . . . . . . . . . . . . — 2,120,954 2,339,230 2,044,942
ⳮ Fund investments . . . . . . . . . . . . . . . — 476,000 402,699 99,499
ⳮ Wealth management products . . . . . . — — — 362,799
ⳮ Unlisted equity investments . . . . . . . — 25,000 25,000 25,000
368,130 3,556,804 3,670,260 3,163,042

The Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Listed
— Debt investments . . . . . . . . . . . . . . . — 1,512 143,852 —

Unlisted
— Debt investments . . . . . . . . . . . . . . . — — 497,627 —
— Wealth management products . . . . . . — — — 300,000
— Equity investments. . . . . . . . . . . . . . — 25,000 25,000 25,000
— 26,512 666,479 325,000

— I-77 —
APPENDIX I ACCOUNTANT’S REPORT

26. INVESTMENTS CLASSIFIED AS LOANS AND RECEIVABLES

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Trust investment scheme . . . . . . . . . . . . . 200,128 489,912 845,266 969,853
Wealth management products . . . . . . . . . . 208,171 717,984 862,382 746,598
408,299 1,207,896 1,707,648 1,716,451

The Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Trust investment scheme . . . . . . . . . . . . . — — 124,587 88,639
Wealth management products . . . . . . . . . . 208,171 — — —
208,171 — 124,587 88,639

As at 31 December of 2014, 2015, 2016 and 31 March of 2017, the underlying loan assets of the
trust investment schemes were neither pass due nor impaired. After considering the creditability of
each of the counterparties and the collateral or guarantee obtained, no impairment was provided for
such loan assets. The Group’s maximum exposure to loss in the trust investment schemes is limited
to its carrying amounts, see Note 4(b).

27. RESTRICTED STATUTORY DEPOSITS

The Group and the Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


At the beginning of the year/period . . . . . 200,000 200,000 248,125 248,125
Addition . . . . . . . . . . . . . . . . . . . . . . . . . — 48,125 — —
At the end of the year/period . . . . . . . . . . 200,000 248,125 248,125 248,125

— I-78 —
APPENDIX I ACCOUNTANT’S REPORT

In accordance with relevant provision of Insurance Law of the PRC, the Company should place
20% of its share capital as restricted statutory deposits, respectively.

As at 31 December 2014

Amount Storage Period

RMB’000
China Everbright Bank . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
China Citic Bank . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

As at 31 December 2015

Amount Storage Period

RMB’000
China Everbright Bank . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
China Citic Bank . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
China Merchants Bank . . . . . . . . . . . . . . . . . . . . 48,125 Term deposit 3 years
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,125

As at 31 December 2016

Amount Storage Period

RMB’000
China Everbright Bank . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
China Citic Bank . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
China Merchants Bank . . . . . . . . . . . . . . . . . . . . 48,125 Term deposit 3 years
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,125

As at 31 March 2017

Amount Storage Period

RMB’000

China Everbright Bank . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years


China Citic Bank . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Term deposit 5 years
China Merchants Bank . . . . . . . . . . . . . . . . . . . . 48,125 Term deposit 3 years
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,125

— I-79 —
APPENDIX I ACCOUNTANT’S REPORT

28. PROPERTY AND EQUIPMENT

The Group and the Company

Office
Electrical furniture and Leasehold
Motor vehicles equipment equipment improvements Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Cost
At 1 January 2014 . . . . . — 1,973 390 5,926 8,289
Additions . . . . . . . . . . . . 3,330 1,008 403 1,726 6,467
Disposals . . . . . . . . . . . . — (18) (22) — (40)
At 31 December 2014 . . . 3,330 2,963 771 7,652 14,716
Additions . . . . . . . . . . . . — 6,529 27 2,568 9,124
Disposals . . . . . . . . . . . . — (8) — — (8)
At 31 December 2015 . . . 3,330 9,484 798 10,220 23,832
Additions . . . . . . . . . . . . — 13,085 3,175 30,778 47,038
Disposals . . . . . . . . . . . . — (63) — — (63)
At 31 December 2016 . . . 3,330 22,506 3,973 40,998 70,807
Additions . . . . . . . . . . . . — 2,137 2,213 871 5,221
At 31 March 2017 . . . . . 3,330 24,643 6,186 41,869 76,028

Accumulated depreciation
and impairment
At 1 January 2014 . . . . . — (116) (22) (552) (690)
Depreciation charge . . . . (284) (429) (107) (2,546) (3,366)
Disposals . . . . . . . . . . . . — 4 4 — 8
At 31 December 2014 . . . (284) (541) (125) (3,098) (4,048)
Depreciation charge . . . . (633) (979) (147) (3,420) (5,179)
Disposals . . . . . . . . . . . . — 3 — — 3
At 31 December 2015 . . . (917) (1,517) (272) (6,518) (9,224)
Depreciation charge . . . . (633) (2,986) (349) (3,984) (7,952)
Disposals . . . . . . . . . . . . — 20 — — 20
At 31 December 2016 . . . (1,550) (4,483) (621) (10,502) (17,156)
Depreciation charge . . . . (158) (1,133) (280) (1,679) (3,250)
At 31 March 2017 . . . . . (1,708) (5,616) (901) (12,181) (20,406)

Net book value


At 31 December 2014 . . . 3,046 2,422 646 4,554 10,668
At 31 December 2015 . . . 2,413 7,967 526 3,702 14,608
At 31 December 2016 . . . 1,780 18,023 3,352 30,496 53,651
At 31 March 2017 . . . . . 1,622 19,027 5,285 29,688 55,622

— I-80 —
APPENDIX I ACCOUNTANT’S REPORT

29. INTANGIBLE ASSETS

The Group and the Company

Chinese domain
Software name registration Total

RMB’000 RMB’000 RMB’000


Cost
At 1 January 2014 . . . . . . . . . . . . . . . . . . . . . 3,037 — 3,037
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,611 19 9,630
At 31 December 2014 . . . . . . . . . . . . . . . . . . . 12,648 19 12,667
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,897 — 31,897
At 31 December 2015 . . . . . . . . . . . . . . . . . . . 44,545 19 44,564
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,048 — 125,048
At 31 December 2016 . . . . . . . . . . . . . . . . . . . 169,593 19 169,612
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,615 — 36,615
At 31 March 2017 . . . . . . . . . . . . . . . . . . . . . 206,208 19 206,227

Accumulated amortization
At 1 January 2014 . . . . . . . . . . . . . . . . . . . . . (61) — (61)
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . (870) (1) (871)
At 31 December 2014 . . . . . . . . . . . . . . . . . . . (931) (1) (932)
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . (3,300) (2) (3,302)
At 31 December 2015 . . . . . . . . . . . . . . . . . . . (4,231) (3) (4,234)
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . (17,423) (2) (17,425)
At 31 December 2016 . . . . . . . . . . . . . . . . . . . (21,654) (5) (21,659)
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . (10,733) - (10,733)
At 31 March 2017 . . . . . . . . . . . . . . . . . . . . . (32,387) (5) (32,392)

Carrying amount
At 31 December 2014 . . . . . . . . . . . . . . . . . . . 11,717 18 11,735

At 31 December 2015 . . . . . . . . . . . . . . . . . . . 40,314 16 40,330

At 31 December 2016 . . . . . . . . . . . . . . . . . . . 147,939 14 147,953

At 31 March 2017 . . . . . . . . . . . . . . . . . . . . . 173,821 14 173,835

— I-81 —
APPENDIX I ACCOUNTANT’S REPORT

30. DEFERRED INCOME TAX ASSETS AND LIABILITIES

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Net deferred income tax liabilities, at the
beginning of year/period . . . . . . . . . . . . — (970) (39,324) (24,517)
Recognized in profit or loss . . . . . . . . . . . 397 (15,336) (3,643) 20,608
Recognized in other comprehensive
income . . . . . . . . . . . . . . . . . . . . . . . . . (1,367) (23,018) 18,450 3,909
Net deferred income tax liabilities, at the
end of year/period . . . . . . . . . . . . . . . . (970) (39,324) (24,517) —

The movement in deferred income tax assets and liabilities during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, is as follows:

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Deferred tax assets/(liabilities)
Accumulated taxable losses . . . . . . . . . . . 8,983 105,247 137,200 137,564
Salary payable . . . . . . . . . . . . . . . . . . . . . 3,177 — — —
Insurance contract liabilities . . . . . . . . . . 476 13,036 3,944 19,788
Amortisation of intangible assets . . . . . . . 100 347 1,720 3,156
Employee Stock Ownership Plan . . . . . . . — 6,987 8,645 8,917
Bad debt provision . . . . . . . . . . . . . . . . . . — — 41 —
Unrealized gains of structured entities . . . (9,860) (127,925) (147,040) (168,446)
Net fair value adjustment on
available-for-sale financial assets . . . .. (1,367) (24,385) (5,935) (2,026)
Net fair value adjustment on financial
assets carried at fair value through
profit or loss . . . . . . . . . . . . . . . . . . .. (2,479) (12,631) (23,092) 1,047
Net deferred income tax assets or
liabilities . . . . . . . . . . . . . . . . . . . . . . . (970) (39,324) (24,517) —

Represented by
Deferred tax assets . . . . . . . . . . . . . . . . 12,736 125,617 151,550 170,472
Deferred tax liabilities . . . . . . . . . . . . . (13,706) (164,941) (176,067) (170,472)

— I-82 —
APPENDIX I ACCOUNTANT’S REPORT

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the
realisation of the related tax benefit through future taxable profits is probable. At 31 March 2017, the
Group did not recognise deferred income tax assets of RMB67,798 thousand in respect of losses
amounting to RMB271,192 thousand that can be carried forward against future taxable income. Losses
amounting to RMB271,192 thousand in the three months ended March 2017 expires in 2022.

31. OTHER ASSETS

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Deposits . . . . . . . . . . . ... . . . . . . . . . . . . 3,500 15,336 24,931 26,125
Advanced payment . . . ... . . . . . . . . . . . . 2,910 56,297 41,630 56,754
Estimate of VAT input tax . . . . . . . . . . . . — — 25,156 25,680
Others . . . . . . . . . . . . ... . . . . . . . . . . . . 419 164 10,984 23,613
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,829 71,797 102,701 132,172

The Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Deposits . . . . . . . . . . . ... . . . . . . . . . . . . 3,500 15,336 24,931 25,920
Advanced payment . . . ... . . . . . . . . . . . . 2,910 56,297 41,607 54,951
Estimate of VAT input tax . . . . . . . . . . . . — — 25,130 25,661
Others . . . . . . . . . . . . ... . . . . . . . . . . . . 419 164 10,346 22,583
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,829 71,797 102,014 129,115

32. SHARE CAPITAL

The Group and the Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Number of shares issued and fully paid
at RMB1 yuan each . . . . . . . . . . . . . . . 1,000,000 1,240,625 1,240,625 1,240,625

— I-83 —
APPENDIX I ACCOUNTANT’S REPORT

33. RESERVES

The amounts of the Group’s reserves and the movements therein during the year/period are
presented in the consolidated statement of changes in equity.

(a) Capital reserves

Capital reserves mainly represents share premium from issuance of shares.

(b) Surplus reserves

Surplus reserves consist of the statutory surplus reserve and the discretionary surplus reserve.

(i) Statutory surplus reserves (the “SSR”)

According to the PRC Company Law and the articles of association of the Company, the
Company is required to set aside 10% of their net profit (after offsetting the accumulated losses
incurred in previous years) determined under PRC GAAP, to the SSR until the balance reaches 50%
of the respective registered capital.

Subject to the approval of shareholders, the SSR may be used to offset the accumulated losses,
if any, and may also be converted into capital, provided that the balance of the SSR after such
capitalisation is not less than 25% of the registered capital of the Company’s retained profits. Since
the Company does not have net profit at its company level instead of Group level, no reserve has been
retained.

(ii) Discretionary surplus reserves (the “DSR”)

After making necessary appropriations to the SSR, the Company may also appropriate a portion
of their net profit to the DSR upon the approval of the shareholders in general meetings.

Subject to the approval of the shareholders, the DSR may be used to offset accumulated losses,
if any, and may be converted into capital.

(c) General reserves

In accordance with the relevant regulations, general reserves should be set aside to cover
catastrophic losses as incurred by companies operating in the insurance business. The Company would
need to make appropriations for such reserve based on their respective year end net profit determined
in accordance with PRC GAAP, and based on the applicable PRC financial regulations, in the annual
financial statements. Such reserve is not available for profit distribution or transfer as capital
injection.

Since the Company does not have net profit at its company level instead of Group level, no
reserve has been retained.

— I-84 —
APPENDIX I ACCOUNTANT’S REPORT

(d) Other reserves

The investment revaluation reserve records the fair value changes of available-for-sale financial
assets. The foreign currency translation reserve is used to record exchange differences arising from the
translation of the financial statements of the subsidiaries incorporated outside the PRC.

34. SHARE-BASED PAYMENTS

(a) 2014 Share Option Plan

On 4 December 2014, the general meeting of shareholders of the Company approved the
establishment of an equity-settled share-based compensation plan (the “2014 Share Option Plan”) that
provides the granting options to eligible directors and employees (collectively, the “Grantees”) to
acquire shares of the Company at an exercise price of RMB1.5 yuan per share. Upon the 2014 Share
Option Plan, 100,000,000 shares have been reserved by one of the shareholders of the Company,
namely Unifront Holding Limited. (Unifront Holding), for Grantees.

On 9 January 2015, the Company granted 60,000,000 share options to its directors and
employees. Subject to the Grantee continuing to be a service provider, 100% of these options were
vested upon fulfilling the condition in the share option agreement. Since then, these options were
vested over 4 years.

(b) Revised 2014 Share Option Plan

Pursuant to “Bao Jian Fa [2015] No.56 — Notice on Relevant Matters Concerning the Insurance
Companies to Carry Out Employee Stock Plan” issued by CIRC on 2 July 2015, the Company modified
the terms and conditions of 2014 Share Option Plan. Such revised 2014 Share Option Plan (“Share
Ownership Plan”) has been approved by the general meeting of shareholders of the Company on 18
December 2015.

Under the Share Ownership Plan, Unifront Holding transferred 60,000,000 shares to two holding
vehicles (“Holding Vehicles”), namely Shanghai Haoguan Investment Management Partnership
(Limited Partnership) (“Shanghai Haoguan”) and Shanghai Qianguo Investment Management
Partnership (Limited Partnership) (“Shanghai Qianguo”). Aggregate considerations amounting to
RMB90,000 thousand for such shares transfer have been paid by the two Holding Vehicles to Unifront
Holding, after the Holding Vehicles received the cash paid in by the Grantees at the exercise price of
RMB1.5 yuan per share.

Number of shares
of the Company Aggregate cash
held by the Exercise price per paid in by the Cash settled to
Holding Vehicles Holding Vehicles share Grantees Unifront Holding

(in RMB’000) (in RMB’000)


Shanghai Haoguan . . . . . . . . . . 28,570,000 RMB1.5 yuan 42,855 42,855
Shanghai Qianguo . . . . . . . . . . 31,430,000 RMB1.5 yuan 47,145 47,145

— I-85 —
APPENDIX I ACCOUNTANT’S REPORT

The Grantees can dispose their interests in the Holding Vehicles after the Company successfully
complete an initial public offering and the Company’s shares get listed in the stock exchange (“IPO
and listing”) and a three-year locking period (“Locking Period”) after the IPO and listing. The
Grantees will be entitled to a disposal of 25% of such interests in the Holding Vehicles each year after
the Locking Period.

The Group has no legal or constructive obligations to repurchase the shares of the Company from
the Holding Vehicles.

In five years, if the Company fails to complete an IPO and listing, Unifront Holding will have
the constructive obligation to repurchase the shares held by the Holding Vehicles. The repurchase
price will be determined at arm’s length.

The directors have used the income approach-discounted cash flow method to determine the fair
value of the shares of the Company, and adopted Black-Scholes Option Pricing Model and Binominal
Option Pricing Model to determined the fair value of the underlying share options. Key assumptions,
such as discount rate and projections of future performance, are required to be determined by the
directors with best estimate.

Based on fair value of the underlying shares, the directors have used Binominal pricing model
to determine the fair value of the share options as of the grant date, which amounted to RMB0.64 yuan
per share option. Key assumptions are set out as below:

Dividend rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . 0.00


Volatility (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . 44
Risk-free interest rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . 3.427
Dividend yield (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . 9.4
Estimate share price at grant date according to income approach (in RMB yuan) . . 1.4
Exercise price (in RMB yuan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . 1.5

The total expenses recognized in the consolidated statements of comprehensive income for
employee ownership plan is disclosed in Note 13.

The remaining contractual life of share options outstanding as at 31 December 2015, 2016 and
31 March 2017 is 8.9 years, 7.9 years and 7.6 years, respectively.

— I-86 —
APPENDIX I ACCOUNTANT’S REPORT

35. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Securities - bonds
ⳮ Traded in stock exchange . 140,000 1,600 282,674 2,300
140,000 1,600 282,674 2,300

36. INSURANCE CONTRACT LIABILITIES

The Group and the Company

31 December 2014

Reinsurers’ share
Insurance of insurance
contract liabilities contract liabilities Net

RMB’000 RMB’000 RMB’000


Insurance contracts liabilities
ⳮ Unearned premium reserves . . . . . . . . . . . . 87,459 (2,612) 84,847
ⳮ Claim reserves . . . . . . . . . . . . . . . . . . . . . . 35,546 (2,396) 33,150
123,005 (5,008) 117,997

Incurred but not reported claim reserves . . . . . . 20,768 (1,961) 18,807

31 December 2015

Reinsurers’ share
Insurance of insurance
contract liabilities contract liabilities Net

RMB’000 RMB’000 RMB’000


Insurance contracts liabilities
ⳮ Unearned premium reserves . . . . . . . . . . . . 441,579 (5,627) 435,952
ⳮ Claim reserves . . . . . . . . . . . . . . . . . . . . . . 174,652 (2,228) 172,424
616,231 (7,855) 608,376

Incurred but not reported claim reserves . . . . . . 134,620 (1,049) 133,571

— I-87 —
APPENDIX I ACCOUNTANT’S REPORT

31 December 2016
Reinsurers’ share
Insurance of insurance
contract liabilities contract liabilities Net
RMB’000 RMB’000 RMB’000
Insurance contracts liabilities
ⳮ Unearned premium reserves . . . . . . . . . . . . 601,256 (22,299) 578,957
ⳮ Claim reserves . . . . . . . . . . . . . . . . . . . . . . 196,049 (1,805) 194,244
797,305 (24,104) 773,201
Incurred but not reported claim reserves . . . . . . 58,893 (1,699) 57,194

The Group and the Company

31 March 2017
Reinsurers’ share
Insurance of insurance
contract liabilities contract liabilities Net
RMB’000 RMB’000 RMB’000
Insurance contracts liabilities
ⳮ Unearned premium reserves . . . . . . . . . . . . 722,989 (36,400) 686,589
ⳮ Claim reserves . . . . . . . . . . . . . . . . . . . . . . 245,673 (4,109) 241,564
968,662 (40,509) 928,153
Incurred but not reported claim reserves . . . . . . 89,155 (4,080) 85,075

Movements of unearned premium reserves

Reinsurers’ share
Insurance of insurance
contract liabilities contract liabilities Net

RMB’000 RMB’000 RMB’000


At 1 January 2014 . . . . . . . . . . . . . . . . . . . . . . . 10,201 — 10,201
Premiums written . . . . . . . . . . . . . . . . . . . . . . . . 794,097 (7,265) 786,832
Premiums earned . . . . . . . . . . . . . . . . . . . . . . . . (716,839) 4,653 (712,186)
At 31 December 2014 . . . . . . . . . . . . . . . . . . . . 87,459 (2,612) 84,847
Premiums written . . . . . . . . . . . . . . . . . . . . . . . . 2,283,042 (10,443) 2,272,599
Premiums earned . . . . . . . . . . . . . . . . . . . . . . . . (1,928,922) 7,428 (1,921,494)
At 31 December 2015 . . . . . . . . . . . . . . . . . . . . 441,579 (5,627) 435,952
Premiums written . . . . . . . . . . . . . . . . . . . . . . . . 3,408,048 (39,632) 3,368,416
Premiums earned . . . . . . . . . . . . . . . . . . . . . . . . (3,248,371) 22,960 (3,225,411)
At 31 December 2016 . . . . . . . . . . . . . . . . . . . . 601,256 (22,299) 578,957
Premiums written . . . . . . . . . . . . . . . . . . . . . . . . 1,030,363 (35,954) 994,409
Premiums earned . . . . . . . . . . . . . . . . . . . . . . . . (908,630) 21,853 (886,777)
At 31 March 2017 . . . . . . . . . . . . . . . . . . . . . . . 722,989 (36,400) 686,589

— I-88 —
APPENDIX I ACCOUNTANT’S REPORT

Movements of claim reserves

Reinsurers’ share
Insurance of insurance
contract liabilities contract liabilities Net

RMB’000 RMB’000 RMB’000


At 1 January 2014 . . . . . . . . . . . . . . . . . . . . . . . 787 2,396 3,183
Claims incurred . . . . . . . . . . . . . . . . . . . . . . . . . 525,841 (5,334) 520,507
Claims paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (491,082) 542 (490,540)
At 31 December 2014 . . . . . . . . . . . . . . . . . . . . 35,546 (2,396) 33,150
Claims incurred . . . . . . . . . . . . . . . . . . . . . . . . . 1,332,347 (16,076) 1,316,271
Claims paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,193,241) 16,244 (1,176,997)
At 31 December 2015 . . . . . . . . . . . . . . . . . . . . 174,652 (2,228) 172,424
Claims incurred . . . . . . . . . . . . . . . . . . . . . . . . . 1,362,171 (6,880) 1,355,291
Claims paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,340,774) 7,303 (1,333,471)
At 31 December 2016 . . . . . . . . . . . . . . . . . . . . 196,049 (1,805) 194,244
Claims incurred . . . . . . . . . . . . . . . . . . . . . . . . . 401,507 (4,795) 396,712
Claims paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (351,883) 2,491 (349,392)
At 31 March 2017 . . . . . . . . . . . . . . . . . . . . . . . 245,673 (4,109) 241,564

37. INVESTMENT CONTRACT LIABILITIES

The Group and the Company

RMB’000

At 1 January 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Deposits received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,884
Deposits withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (323)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
At 31 December 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,562
Deposits received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,466,073
Deposits withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,912,127)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,381
Fees deducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,820)
At 31 December 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573,069
Deposits received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,794
Deposits withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (511,904)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,502)
Fees deducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (261)
At 31 March 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,196

— I-89 —
APPENDIX I ACCOUNTANT’S REPORT

38. OTHER LIABILITIES

The Group

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Service charge payable. . . . . . . 37,430 278,966 390,488 350,994
Salary and staff welfare
payable . . . . . . . . . . . . . . . . . 13,671 55,342 40,412 46,766
Tax payable other than income
tax . . . . . . . . . . . . . . . . . . . . 8,826 21,027 58,180 18,097
Insurance guarantee fund . . . . . 6,278 13,501 13,841 17,518
Commission and brokerage
payable . . . . . . . . . . . . . . . . . 6,019 26,292 39,196 56,052
Claims payable . . . . . . . . . . . . 632 12,603 14,824 6,578
Rent payable . . . . . . . . . . . . . . — 9,490 7,338 8,390
Insurance business supervision
fees . . . . . . . . . . . . . . . . . . . 1,026 1,039 — 831
Deferred income . . . . . . . . . . . — 3,741 4,665 4,507
Deposit payable . . . . . . . . . . . . — 42,593 80,766 105,046
Others . . . . . . . . . . . . . . . . . . . 8,273 25,438 50,158 87,928
82,155 490,032 699,868 702,707

The Company

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Service charge payable. . . . . . . 37,430 278,966 390,488 350,994
Salary and staff welfare
payable . . . . . . . . . . . . . . . . . 13,671 55,342 40,412 46,688
Tax payable other than income
tax . . . . . . . . . . . . . . . . . . . . 8,826 21,027 58,309 18,402
Insurance guarantee fund . . . . . 6,278 13,501 13,841 17,518
Commission and brokerage
payable . . . . . . . . . . . . . . . . . 6,019 26,292 39,196 56,052
Claims payable . . . . . . . . . . . . 632 12,603 14,824 6,578
Rent payable . . . . . . . . . . . . . . — 9,490 7,338 8,390
Insurance business supervision
fees . . . . . . . . . . . . . . . . . . . 1,026 1,039 — 831
Deferred income . . . . . . . . . . . — 3,741 4,665 4,507
Deposit payable . . . . . . . . . . . . — 42,593 80,766 105,046
Others . . . . . . . . . . . . . . . . . . . 7,537 18,720 44,116 77,367
81,419 483,314 693,955 692,373

— I-90 —
APPENDIX I ACCOUNTANT’S REPORT

39. NOTE TO CONSOLIDATED CASH FLOW STATEMENT

Reconciliation from profit before income tax to cash generated from operating activities:

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Profit/(loss) before tax 36,584 59,593 13,015 (293,692) (222,704)
Provisions for asset impairment . . . — — 166 — —
Investment income . . . . . . . . . . . . (80,062) (520,684) (98,624) 167,093 (95,552)
Net fair value gains through profit
or loss . . . . . . . . . . . . . . . . . . . . (9,914) (40,611) (41,843) 52,435 96,555
Depreciation of property and
equipment . . . . . . . . . . . . . . . . . 3,366 5,179 7,952 1,680 3,250
Amortization of intangible assets . 871 3,302 17,425 2,305 10,733
Loss on disposal of items of
property and equipment,
intangible assets and other
long-term assets . . . . . . . . . . . . . 33 4 44 — —
Exchange gain or loss . . . . . . . . . . — — (9) 1 31
Finance costs . . . . . . . . . . . . . . . . . 5,702 3,078 203 157 445
Expense recognized for
share-based payments . . . . . . . . . — 27,947 6,632 2,158 1,091
(Increase)/decrease in premiums
receivables . . . . . . . . . . . . . . . . . (21,511) (90,761) (62,065) 27,759 368
(Increase)/decrease in reinsurance
assets . . . . . . . . . . . . . . . . . . . . . (534) (14,223) 3,919 (2,445) (3,630)
Amortisation of deferred income . . — (259) (476) (111) (158)
Change in insurance contract
liabilities . . . . . . . . . . . . . . . . . . 107,010 490,378 164,825 52,935 154,952
Decrease in operating receivables . (1,221) (57,017) (21,867) (38,106) (33,396)
Increase/(decrease) in other
operating liabilities . . . . . . . . . . 79,295 434,621 864,090 71,123 (430,038)
Cash generated from/(used in)
operating activities . . . . . . . . . . 119,619 300,547 853,387 43,292 (518,053)

— I-91 —
APPENDIX I ACCOUNTANT’S REPORT

40. RELATED PARTY TRANSACTIONS

The Company’s directors were of the view that Ant Small and Micro Financial Services Group
Co. Ltd. (“Ant Financial”), Ping An Insurance (Group) Co. of China Ltd. (“Ping An Insurance”),
Tencent Holdings Limited (“Tencent”), Ctrip.com International Ltd. (“Ctrip”) and their subsidiaries
and key management personnel were considered as related parties of the Group. Alibaba Group
Holdings Limited (“Alibaba”) and its subsidiaries were also considered as related parties of the Group
given the relationship between Alibaba and Ant Financial Services.

Transactions with key management personnel have been disclosed in Note 40 below. The Group’s
transaction with related parties are conducted under the ordinary course of business.

(a) Sale of insurance contracts to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Ant Financial and its subsidiaries . 28,049 80,290 85,234 44,418 3,844
Alibaba and its subsidiaries . . . . . 38,908 105,943 6,326 1,244 1,288
Ctrip and its subsidiaries . . . . . . . — — 40,000 — —
Tencent and its subsidiaries . . . . . . — 15,798 7,568 126 88
Key management personnel . . . . . . 1,041 28 2,871 116 208
67,998 202,059 141,999 45,904 5,428

(b) Technical service fees paid to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Ant Financial and its subsidiaries . 22,775 304,716 437,735 78,718 94,332
Alibaba and its subsidiaries . . . . . 44,189 28,716 — — —
Ctrip and its subsidiaries . . . . . . . 25,200 170,032 349,318 93,797 109,834
Ping An Insurance and its
subsidiaries . . . . . . . . . . . . . . . . — — 13 — —
Tencent and its subsidiaries . . . . . . — — 352 — 356
92,164 503,464 787,418 172,515 204,522

— I-92 —
APPENDIX I ACCOUNTANT’S REPORT

(c) Commission fees paid to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)

Ctrip and its subsidiaries . . . . . . . 17,725 90,719 136,921 37,914 32,582

(d) Guarantee fee paid to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Ant Financial and its subsidiaries . — 215 11,405 2,661 2,135

(e) Purchase of goods and services fee paid to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Ant Financial and its subsidiaries . — — 2,967 — 2,468
Tencent and its subsidiaries . . . . . . — — 975 — —
Key Management personnel . . . . . . — — 8 — —
— — 3,950 — 2,468

(f) Claim of insurance contracts to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Ant Financial and its subsidiaries . 15,180 44,584 59,211 20,289 56
Alibaba and its subsidiaries . . . . . . 33,404 107,800 10,257 3,523 1,856
Tencent and its subsidiaries . . . . . . — 558 2,549 398 794
Key Management personnel . . . . . . 5 226 5 — 2
48,589 153,168 72,022 24,210 2,708

— I-93 —
APPENDIX I ACCOUNTANT’S REPORT

(g) Cloud rental fee paid to related parties

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Alibaba and its subsidiaries . . . . . 3,195 7,500 22,550 4,803 8,903

(h) Advisory income charge from related parties

Three months ended


Year ended 31 December 31 March
2014 2015 2016 2016 2017
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Ping An Insurance and its
subsidiaries (a) . . . . . . . . . . . . . . — — — — 8,756

(i) Asset management fees paid or payable to related parties

Three months ended


Year ended 31 December 31 March
2014 2015 2016 2016 2017
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Ping An Insurance and its
subsidiaries . . . . . . . . . . . . . . . . 1,534 13,251 17,762 4,382 4,606

(j) Year end balances of other payables arising from related parties transactions

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Ant Financial and its
subsidiaries. . . . . . . . . . . .. . 6,387 147,986 289,772 229,988
Alibaba and its subsidiaries . . 27,621 — 7,150 3,417
Ctrip and its subsidiaries . .. . — 70,367 40,857 51,124
Key Management personnel .. . — 400 30 —
34,008 218,753 337,809 284,529

— I-94 —
APPENDIX I ACCOUNTANT’S REPORT

(k) Year end balances of premiums receivables arising from related parties transactions

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Ant Financial and its
subsidiaries. . . . . . . . . . . . . . 222 3,121 — 3
Ctrip and its subsidiaries . . . . 14,945 82,707 44,716 47,885
15,167 85,828 44,716 47,888

(l) Year end balances of commissions payable arising from related parties transactions

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Ctrip and its subsidiaries . . . . 5,978 18,527 8,937 11,458

(m) Year end balances of advanced payable arising from related parties transactions

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Ant Financial and its
subsidiaries. . . . . . . . . . . . . . — — — 6,952

(n) Year end balances of other receivables arising from related parties transactions

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Ping An Insurance and its
subsidiaries. . . . . . . . . . . . . . — — — 9,281

— I-95 —
APPENDIX I ACCOUNTANT’S REPORT

(o) Compensation of key management personnel

The compensations paid or payable to key management personnel are shown below:

Three months ended


Year ended 31 December 31 March

2014 2015 2016 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


(Unaudited)
Wages, salaries and bonuses . . . .. 6,048 8,023 11,623 2,757 2,861
Pension costs — defined
contribution plans . . . . . . . . . .. 109 137 168 124 107
Other social security costs,
housing benefits and other
employee benefits. . . . . . . . . . .. 129 170 195 128 103
Share-based payments (Note 34) .. — 17,940 4,534 1,544 780
6,286 26,270 16,520 4,553 3,851

41. CONTINGENT LIABILITIES

Owing to the nature of the insurance business, the Group is involved in the making of estimates
for contingencies and legal proceedings in the ordinary course of business, both in the capacity as
plaintiff or defendant in litigation and arbitration. Legal proceedings mostly involve claims on the
Group’s insurance products. Provision has been made for the probable losses to the Group, including
those claims where directors can reasonably estimate the outcome of the litigations taking into account
the related legal advice, if any. No provision is made for contingencies and legal proceedings when
the result cannot be reasonably estimated or the probability of loss is so low.

In addition to the above legal proceedings, as at 31 December 2014, 2015, 2016 and 31 March
2017, the Group has no major pending litigation as the defendant.

— I-96 —
APPENDIX I ACCOUNTANT’S REPORT

42. COMMITMENTS

Operating lease commitments

We lease our office spaces from third parties under non-cancellable operating leases. The
following table below sets forth our future minimum lease payments under irrevocable rental contracts
as of the dates indicated:

At 31 December At 31 March

2014 2015 2016 2017

RMB’000 RMB’000 RMB’000 RMB’000


Within 1 year (including 1
year). . . . . . . . . . . . . . . . ... 13,698 33,521 75,695 81,701
1 to 2 years (including 2
years) . . . . . . . . . . . . . . . ... 4,983 27,574 63,516 61,700
2 to 3 years (including 3
years) . . . . . . . . . . . . . . . ... — 22,839 47,589 46,678
Over 3 years . . . . . . . . . . . ... — 104,746 171,140 164,332
18,681 188,680 357,940 354,411

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or the Group in respect of
any period subsequent to 31 March 2017 and up to the date of this report. Save as disclosed in this
report, no dividend or distribution has been declared or made by the Group in respect of any period
subsequent to 31 March 2017.

— I-97 —
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set forth in this appendix does not form part of the Accountant’s Report
prepared by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the reporting
accountant of our Company, as set forth in Appendix I to this prospectus. The unaudited pro forma
financial information should be read in conjunction with the section headed “Financial
Information” in this prospectus and the Accountant’s Report set forth in Appendix I to this
prospectus.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following is an illustrative and pro forma statement of adjusted consolidated net tangible
assets of the Group which has been prepared based on the notes set out below for the purpose of
illustrating the effect of the Global Offering as if the Global Offering had occurred on 31 March 2017.

The unaudited pro forma statement of adjusted consolidated net tangible assets has been prepared
for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of
the financial position of our Group had the Global Offering been completed as of 31 March 2017 or
any future date.

Audited
Consolidated Unaudited
Net Tangible Estimated Net Pro Forma
Assets of the Proceeds from Adjusted Net Unaudited Pro Forma
Group as at 31 the Global Tangible Assets Adjusted Net Tangible Assets
March 2017 Offering of the Group per Share

Note 1 Note 2 Note 3 Note 3


RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price of
HK$53.70 per share . . . . 6,471,358 8,681,816 15,153,174 10.52 12.57
Based on an Offer Price of
HK$59.70 per share . . . . 6,471,358 9,657,328 16,128,686 11.20 13.38

— II-1 —
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:
1. The audited consolidated net tangible assets of the Group as at 31 March 2017 is based on the audited consolidated net
assets of the Group as at 31 March 2017 of approximately RMB6,646,240 thousand, as shown in the Accountant’s Report,
the text of which is set out in Appendix I to this prospectus, with an adjustment for the intangible assets and goodwill
of the Group as at 31 March 2017 of approximately RMB 174,882 thousand.
2. The estimated net proceeds from the Global Offering are based on the indicative Offer Prices of HK$53.70 and HK$59.70
per share, being the lower end and higher end of the stated offer price range, after deduction of the underwriting fees
and listing related expenses payable by the Group (excluding listing expense of RMB7,603,592 which have been charged
to our consolidated statement of comprehensive income up to 31 March 2017) and takes no account of any shares which
may be allotted and issued upon the exercise of the Over-allotment Option or any shares which may be allotted, issued
or repurchased by the Group pursuant to the general mandate.

3. The unaudited pro forma adjusted net tangible assets per share is arrived at after adjustments referred to in the preceding
paragraphs and on the basis of 1,439,918,900 shares are in issue assuming that the Global Offering has been completed
on 31 March 2017, but takes no account of any shares which may be allotted and issued upon the exercise of the
Over-allotment Option or any shares which may be allotted, issued or repurchased by the Group pursuant to the general
mandate.
4. For the purpose of this unaudited pro forma adjusted net tangible assets, the balance stated in Renminbi are converted
into Hong Kong dollars at a rate of RMB0.83687 to HKD1.00000 set by the PBOC prevailing on 13 September 2017.
No representation is made that Renminbi amounts have been, could have been or may be converted to Hong Kong dollars,
or vice versa, at that rate.
5. No adjustment has been made to the unaudited pro forma adjusted net tangible assets to reflect any trading results or
other transactions of the Group entered into subsequent to 31 March 2017.

— II-2 —
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from PricewaterhouseCoopers, Certified Public
Accountants, Hong Kong, for the purpose of incorporation in this prospectus.

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE


COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of ZhongAn Online P & C Insurance Co., Ltd.

We have completed our assurance engagement to report on the compilation of unaudited pro
forma financial information of ZhongAn Online P & C Insurance Co., Ltd. (the “Company”) and its
subsidiaries (collectively the “Group”) by the directors for illustrative purposes only. The unaudited
pro forma financial information consists of the unaudited pro forma statement of adjusted net tangible
assets of the Group as at 31 March 2017, and related notes (the “Unaudited Pro Forma Financial
Information”) as set out on pages II-1 to II-2 of the Company’s prospectus dated 18 September 2017,
in connection with the proposed initial public offering of the shares of the Company. The applicable
criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial
Information are described on pages II-1 to II-2.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate
the impact of the proposed initial public offering on the Group’s financial position as at 31 March
2017 as if the proposed initial public offering had taken place at 31 March 2017. As part of this
process, information about the Group’s financial position has been extracted by the directors from the
Group’s financial statements for the three months ended 31 March 2017, on which an accountant’s
report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7
Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”)
issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics
for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of
integrity, objectivity, professional competence and due care, confidentiality and professional
behaviour.

— II-3 —
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and
accordingly maintains a comprehensive system of quality control including documented policies and
procedures regarding compliance with ethical requirements, professional standards and applicable
legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules,
on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept
any responsibility for any reports previously given by us on any financial information used in the
compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom
those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance


Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial
Information Included in a Prospectus, issued by the HKICPA. This standard requires that the reporting
accountant plans and performs procedures to obtain reasonable assurance about whether the directors
have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of
the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or
opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial
Information, nor have we, in the course of this engagement, performed an audit or review of the
financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a prospectus is solely to
illustrate the impact of a significant event or transaction on unadjusted financial information of the
entity as if the event had occurred or the transaction had been undertaken at an earlier date selected
for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome
of the proposed initial public offering at 31 March 2017 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial
information has been properly compiled on the basis of the applicable criteria involves performing
procedures to assess whether the applicable criteria used by the directors in the compilation of the
unaudited pro forma financial information provide a reasonable basis for presenting the significant
effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence
about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The unaudited pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the
reporting accountant’s understanding of the nature of the company, the event or transaction in respect
of which the unaudited pro forma financial information has been compiled, and other relevant
engagement circumstances.

— II-4 —
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The engagement also involves evaluating the overall presentation of the unaudited pro forma
financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Our work has not been carried out in accordance with auditing standards or other standards and
practices generally accepted in the United States of America or auditing standards of the Public
Company Accounting Oversight Board (United States) and accordingly should not be relied upon as
if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors
of the Company on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial
Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 18 September 2017

— II-5 —
APPENDIX III TAXATION AND FOREIGN EXCHANGE

The following is a summary of certain PRC and Hong Kong tax consequences of the ownership
of H Shares by an investor of H Shares that purchases such H Shares under the Global Offering and
holds the H Shares as capital assets. This summary does not purport to probe into all material tax
consequences of the ownership of H Shares, and does not take into account the specific circumstances
of any particular investor, some of which may be subject to special rules. This summary is based on
the tax laws of the PRC and Hong Kong as in effect as of the Latest Practicable Date, and such laws
and the interpretation thereof are subject to change, possibly with retroactive effect.

This section hereof does not deal with any aspects of Hong Kong or PRC taxation other than
income tax, capital tax, stamp duty and estate duty. Prospective investors are urged to consult their
tax advisers regarding the PRC, Hong Kong and other tax consequences of investing in, and disposing
of, H Shares.

PRC TAXATION

The following is a discussion on certain PRC taxation provisions in respect of the ownership and
disposal of H Shares being purchased and held as capital assets by an investor under the Global
Offering. This summary does not purport to probe into all material tax consequences of the ownership
of H Shares, and does not take into account the specific circumstances of any particular investor. This
summary is based on the tax laws of the PRC as in effect as of the Latest Practicable Date, the
Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for
the Avoidance of Double Taxation, the Prevention of Fiscal Evasion with respect to Taxes on Income,
signed on 21 August 2006, the Second Protocol to the Arrangement between the Mainland of China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income, signed on 11 June 2008, 27 May 2010
and 1 April 2015, the Third Protocol to the Arrangement between the Mainland of China and the Hong
Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with respect to Taxes on Income and The Fourth Protocol to the Arrangement between
the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (collectively referred
to as “Arrangements”), and such laws and the interpretation thereof are subject to change, possibly
with retroactive effect.

The discussion does not deal with any aspects of PRC taxation other than taxation on dividends,
capital tax, stamp duty, estate duty, income tax, value-added tax and business tax. Prospective
investors are urged to consult their tax advisers regarding the PRC and other tax consequences of
owning and disposing of H Shares.

— III-1 —
APPENDIX III TAXATION AND FOREIGN EXCHANGE

TAXATION APPLICABLE TO A JOINT STOCK LIMITED COMPANY

Enterprise Income Tax

According to the Enterprise Income Tax Law of the People’s Republic of China (“EIT Law”) as
promulgated on 16 March 2007 and, subsequently, amended lately and came into effect on 24 February
2017, and the Regulation on the Implementation of the Enterprise Income Tax Law of the People’s
Republic of China as promulgated by the State Council on 6 December 2007 and implemented on 1
January 2008, the applicable tax rate for both domestic enterprises and foreign-capital enterprises is
25%.

Value-added Tax

According to the Provisional Regulations of the PRC on Value Added Tax as promulgated by the
State Council on 13 December 1993 and, subsequently, amended and came into effect lately on 6
February 2016, and the Rules for Implementation of the Provisional Regulations of the People’s
Republic of China on Value Added Tax as promulgated by the Ministry of Finance (“MOF”) on 25
December 1993, subsequently, amended 28 October 2011, and came into effect on 1 November 2011,
entities or individuals engaging in sales of goods or providing processing, and repair and replacement
services and importing goods are taxpayer of value-added tax, and shall be subject to value-added tax.

According to the requirements of the Notice of the Ministry of Finance and the State
Administration of Taxation on Implementing the Pilot Program of Replacing Business Tax with
Value-Added Tax in an All-round Manner (Cai Sui [2016] Document No. 36) and the annexes thereto,
namely The Measures for Implementing the Pilot Program of Replacing Business Tax with
Value-Added Tax, the Provisions on Relevant Matters concerning the Pilot Program of Replacing
Business Tax with Value-Added Tax, the Provisions on the Transitional Policies for the Pilot Program
of Replacing Business Tax with Value-Added Tax, and the Provisions on the Application of VAT Zero
Rate and VAT Exemption Policy to Cross-border Taxable Activities, effective from 1 May 2016, the
pilot program of replacing business tax with value-added tax was implemented across the country, and
the payment of business tax for taxpayers in the construction industry, the real estate industry, the
financial industry, and the living service industry shall be replaced with the payment of value-added
tax at 6%.

— III-2 —
APPENDIX III TAXATION AND FOREIGN EXCHANGE

LAWS AND REGULATIONS OF THE PRC IN RESPECT OF SHAREHOLDERS OF THE


COMPANY

(i) Tax on Dividends

• Individual Investors

According to the Provisional Regulations of China Concerning Questions of Taxation on


Enterprises Experimenting with the Share System and the Individual Income Tax Law of the People’s
Republic of China (“Individual Tax Law”), as amended on 30 June 2011 and effective on 1 September
2011, dividends paid by PRC companies are ordinarily subject to a PRC withholding tax levied at a
rate of 20%. For a foreign individual who is not resident of the PRC, he/she is normally subject to a
withholding tax of 20% unless reduced by an applicable tax treaty or being granted with a special
exemption from the competent authority of the State Council.

On 28 June 2011, the State Administration of Taxation (“SAT”) released the Notice of the State
Administration of Taxation on Matters Concerning the Levy and Administration of Individual Income
Tax After the Repeal of Guo Shui Fa [1993] No. 45 (the “Tax Notice”), pursuant to which, dividends
paid by non-foreign investment companies listed in Hong Kong are subject to a withholding tax in
accordance with Individual and Enterprises Income Tax and the implementation regulations thereof,
and deduction and exemption may be granted to such withholding tax pursuant to applicable double
taxation treaty. Generally, we, as a Hong Kong listed company, are subject to a 10% withholding
income tax on dividends received by individuals with no necessary application. Where the applicable
tax rate required by applicable taxation agreement is below 10%, individual shareholders who are
non-PRC resident are entitled to tax rebate against the PRC tax authorities. Where the applicable tax
rate required by the applicable taxation agreement is between 10% to 20%, the income tax may be
withheld at an applicable tax rate. Where there is no applicable double taxation treaty, tax could be
imposed on the difference between the amount withheld by us and 20% of the dividend amount before
tax for holders of H Shares who are non-PRC resident.

• Enterprise Investors

According to the Arrangement between the Mainland of China and the Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with respect to Taxes on Income, signed on 21 August 2006, the PRC Government may impose tax,
which shall not be more than 10% of the total dividends payable, on Hong Kong residents, including
both natural person and legal person for the dividends paid by PRC companies. Where a Hong Kong
resident is interested in 25% or more in a PRC company, such tax shall not be more than 5% of the
total dividends payable by such PRC company.

— III-3 —
APPENDIX III TAXATION AND FOREIGN EXCHANGE

According to the EIT Law and the Regulation on the Implementation of the Enterprise Income
Tax Law of the People’s Republic of China, non-resident enterprises that do not have an establishment
or premise in China, or who have an establishment or premise but whose income has no practical
relationship with such establishment and premise, shall be subject to an enterprise income tax of 10%
on the income derived in the PRC and may be granted deduction and exemption on such tax pursuant
to the applicable double taxation treaty.

In accordance with the Notice of the State Administration of Taxation on the Issues concerning
Withholding the Enterprise Income Tax on the Dividends Paid by Chinese Resident Enterprises to
H-share Holders Which Are Overseas Non-resident Enterprises (Guo Shui Han [2008] No. 897)
released on and effective from 6 November 2008, a flat rate of 10% withholding enterprise income tax
shall be imposed on Chinese resident enterprises that paid dividends in 2008 and thereafter. Non-PRC
resident enterprises which may be subject to tax at a deducted rate in accordance with the applicable
income tax treaty or arrangement shall apply to the PRC tax authorities for a rebate on any withheld
amount beyond the applicable tax rate and the payment for such rebate shall be subject to the approval
from the PRC tax authorities.

Tax Treaties

Investors who are non-PRC residents but who reside in countries that have entered into double
taxation treaties with the PRC or reside in the Hong Kong Special Administrative Region or the Macao
Special Administrative Region are entitled to a withholding tax deduction treatment on dividends paid
to them by PRC companies. The People’s Republic of China has currently entered into avoidance of
double taxation arrangements with the Hong Kong Special Administrative Region and the Macao
Special Administrative Region respectively, and has entered into double taxation treaties with
numerous other countries, including but not limited to Australia, Canada, France, Germany, Japan,
Malaysia, the Netherlands, Singapore, the UK and the USA.

(ii) Tax on Disposal of Shares

• Individual Investors

According to the Provision for Implementation of the Individual Income Tax Law, as amended
on 18 February 2008 and 19 July 2011, revenue realized on disposal of equity interest shall be subject
to an individual income tax at a tax rate of 20%.

According to the Notice on Individual Income Tax Continues to be Exempted over Individual
Income from Transfer of Shares jointly issued by the MOF and the SAT on 30 March 1998, an
individual who is a non-PRC resident may be exempted from individual income tax on disposal of
shares for the purpose of individual income tax exemption on disposal of shares. To our best
knowledge, as of the Latest Practicable Date, the PRC tax authorities have not, in practice, levied
individual income tax on such proceeds. Should such tax become applicable in future, such individual
may be granted deduction and exemption under the applicable double taxation treaties.

— III-4 —
APPENDIX III TAXATION AND FOREIGN EXCHANGE

• Enterprise Investors

According to the EIT Law and the Regulation on the Implementation of the Enterprise Income
Tax Law of the People’s Republic of China, non-PRC resident enterprises that do not have an
establishment or premise in China, or have an establishment or premise but whose income has no
practical relationship with such establishment and premise shall be subject to an enterprise income tax
of 10% on the income (including dividend and proceeds from disposal of shares of PRC companies)
derived in the PRC. There are uncertainties from the PRC tax authorities on the interpretation on and
implementation of enterprise income tax and the implementation regulations thereof as to, among
other things, whether and how to levy enterprise income tax for the proceeds from disposal or
otherwise dealing with H Shares on holders of H Shares which are non-PRC resident enterprises.
Should such tax become applicable in future, there may be deduction and exemption on the payment
under the applicable double taxation treaties.

(iii) Estate Duty and Inheritance Tax

No estate duty or inheritance tax is imposed in the PRC currently.

(iv) Stamp Duty

Pursuant to the provisions under the Provisional Regulations of the PRC Concerning Stamp Duty,
PRC stamp duty on transfer of shares of listed PRC companies does not apply to the acquisition and
disposal of H Shares outside the PRC. Under the provisional regulations, PRC stamp duty shall be
imposed only on all types of documents that are executed or received in the PRC, legally binding and
under the protection of PRC law.

FOREIGN EXCHANGE

The major regulations governing foreign exchange in the PRC include the Regulations of the
PRC for Foreign Exchange Control, as promulgated on 29 January 1996 and amended most recently
on 5 August 2008, and the Regulations for Administration of Settlement, Sale and Payment of Foreign
Exchange (Yin Fa [1996] No. 210), as promulgated by the PBOC on 20 June 1996 and implemented
on July 1, 1996. Pursuant to those regulations and other relevant rules and regulations on currency
exchange of the PRC, RMB may be freely exchanged for the payment of recurring items, such as trade
and services related foreign exchange transactions and payment of dividends, but may not be freely
exchanged for capital items, such as direct investment, loans or overseas issuance or purchase and
sales of securities or derivatives, unless with prior approval from the SAFE or other local branches.

Pursuant to the Notice on Further Improving and Adjusting the Direct Investment Foreign
Exchange Administration Policies (No. 59 Circular), as issued and implemented by the SAFE on 19
November 2012 and 17 December 2012 respectively, approval procedure for the opening of and capital
transfer into foreign exchange accounts under direct investment is cancelled while canceling the
approval procedure for domestic foreign exchange transfer under direct investment.

— III-5 —
APPENDIX III TAXATION AND FOREIGN EXCHANGE

The Notice on Issues Concerning Foreign Exchange Administration of Overseas Listings was
issued by SAFE on 26 December 2014, which was implemented on the date of its issuance. According
to such notice:

• Domestic companies shall register in relation to its overseas listing with local SAFE branch
at which its registration was made within 15 working days upon the completion of the
listing and issuance of shares overseas. After overseas listing of the domestic company,
domestic shareholders, who intend to increase or decrease their shareholding overseas
according to the relevant requirements, shall complete registration for overseas
shareholding at their respective local SAFE.

• Domestic companies shall open domestic special account in respect of its first issuance (or
additional issue) and buy back of business with banks at the place of its listing with such
proof of overseas listing registration; domestic shareholders of the domestic companies
shall open domestic special account in respect of their increase or decrease of shareholding
overseas with banks at the place of its listing with such proof of overseas shareholding
registration.

Capital raised by overseas listing may be remitted to the corresponding domestic special account
or be placed in an overseas special account. The use of capital shall be consistent with the related
contents set out in the prospectus and other publicly disclosed documents. Domestic companies, with
proof of overseas listing registration, may apply with banks for domestic transfer or payment of the
fund in the overseas listing account or transfer to account for foreign exchange funds settled and to
be paid.

— III-6 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

This appendix contains a summary of laws and regulations on companies and securities in China,
certain major differences between the PRC Company Law and the Companies Ordinance as well as the
additional regulatory provisions of the Hong Kong Stock Exchange on Chinese joint stock limited
companies. The principal objective is to provide an overview of the principal laws and regulations
applicable to us. This summary is made with no intention to include all the information which may
be important to potential investors. For discussion of laws and regulations specifically governing the
business of the Company, please see the section entitled “Regulation Overview”.

PRC LEGAL SYSTEM

The PRC legal system is based on the PRC Constitution (中華人民共和國憲法) (the
“Constitution”) and is made up of written laws, administrative regulations, local regulations, separate
regulations, autonomous regulations, rules and regulations of State Council departments, rules and
regulations of local governments, international treaties of which the PRC Government is a signatory,
and other regulatory documents. Court case verdicts do not constitute binding precedents. However,
they may be used for the purposes of judicial reference and guidance.

According to the Constitution and the Legislation Law of the PRC (中華人民共和國立法法), the
National People’s Congress (the “NPC”) and the Standing Committee of the NPC are empowered to
exercise the legislative power of the State. The NPC has the power to formulate and amend basic laws
governing civil and criminal matters, state organs and other matters. The Standing Committee of the
NPC is empowered to formulate and amend laws other than those required to be enacted by the NPC
and to supplement and amend any parts of laws enacted by the NPC during the adjournment of the
NPC, provided such supplements and amendments are not in conflict with the basic principles of such
laws.

The State Council is the highest organ of the PRC administration and has the power to formulate
administrative regulations based on the Constitution and laws.

The people’s congresses of provinces, autonomous regions and municipalities and their
respective standing committees may formulate local regulations based on the specific circumstances
and actual requirements of their own respective administrative areas, provided that such local
regulations do not contravene any provision of the Constitution, laws or administrative regulations.

The ministries, commissions, People’s Bank of China, National Audit Office of the State Council
and institutions with administrative functions directly under the State Council may formulate
department rules within the authority of their respective departments based on the laws and the
administrative regulations, decisions and rulings of the State Council.

The people’s congresses of larger cities and their respective standing committees may formulate
local regulations based on the specific circumstances and actual requirements of such cities, such
regulations will become enforceable after being reported to and approved by the standing committees
of the relevant provinces or autonomous regions, but such local regulations shall conform with the

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Constitution, laws, administrative regulations, and the relevant local regulations of the relevant
provinces or autonomous regions. People’s congresses of national autonomous areas have the power
to enact autonomous regulations and separate regulations in the light of the political, economic and
cultural characteristics of the nationality (nationalities) in the areas concerned.

The Constitution has supreme legal authority and no laws, administrative regulations, local
regulations, autonomous regulations or separate regulations may contravene the Constitution. The
significance of laws is greater than that of administrative regulations, local regulations, and rules. The
significance of administrative regulations is greater than that of local regulations and rules. The
significance of local regulations is greater than that of the rules of the local governments at or below
the corresponding level. The significance of the rules enacted by the people’s governments of the
provinces or autonomous regions is greater than that of the rules enacted by the people’s governments
of the comparatively larger cities within the administrative areas of the provinces and the autonomous
regions.

The NPC has the power to alter or annul any inappropriate laws enacted by its Standing
Committee, and to annul any autonomous regulations or separate regulations which have been
approved by its Standing Committee but which contravene the Constitution or the Legislation Law.
The Standing Committee of the NPC has the power to annul any administrative regulation that
contravenes the Constitution and laws, to annul any local regulation that contravenes the Constitution,
laws or administrative regulations, and to annul any autonomous regulation or local regulation which
has been approved by the standing committees of the people’s congresses of the relevant provinces,
autonomous regions or municipalities directly under the Central Government, but which contravene
the Constitution and the Legislation Law. The State Council has the power to alter or annul any
inappropriate ministerial rules and rules of local governments. The people’s congresses of provinces,
autonomous regions or municipalities directly under the Central Government have the power to alter
or annul any inappropriate local regulations enacted or approved by their respective standing
committees. The people’s governments of provinces and autonomous regions have the power to alter
or annul any inappropriate rules enacted by the people’s governments at the lower level.

According to the Constitution, the power to interpret laws is vested in the Standing Committee
of the NPC. According to the Decision of the Standing Committee of the NPC Regarding the
Strengthening of Interpretation of Laws (全國人大常務委員會關於加強法律解釋工作的決議) passed
on June 10, 1981, the Supreme People’s Court has the power to give general interpretation on
questions involving the specific application of laws and decrees in court trials. The State Council and
its ministries and commissions are also vested with the power to give interpretations of the
administrative regulations and department rules which they have promulgated. At the regional level,
the power to give interpretations of the local laws and regulations as well as administrative rules is
vested in the regional legislative and administrative organs which promulgate such laws, regulations
and rules.

PRC JUDICIAL SYSTEM

Under the Constitution and the PRC Law of Organization of the People’s Courts (中華人民共和
國人民法院組織法), the PRC judicial system is made up of the Supreme People’s Court, the local
people’s courts, military courts and other special people’s courts.

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The local people’s courts are comprised of the primary people’s courts, the intermediate people’s
courts and the higher people’s courts. The primary people’s courts are organized into civil, criminal,
administrative, supervision and enforcement divisions. The intermediate people’s courts are organized
into divisions similar to those of the primary people’s courts, and are entitled to organize other
divisions as needed, such as the intellectual property division.

The higher level people’s courts supervise the primary and intermediate people’s courts. The
people’s procuratorates also have the rights to exercise legal supervision over the civil proceedings of
people’s courts of the same level and lower levels. The Supreme People’s Court is the highest judicial
body in the PRC. It has the rights to supervise the administration of justice by the people’s courts at
all levels.

The people’s courts employ a two-tier appellate system. A party may appeal against a judgment
or ruling of a local people’s court to the people’s court at the next higher level. Second judgments or
orders given at the next higher level are final. First judgments or orders of the Supreme People’s Court
are also final. If, however, the Supreme People’s Court or a people’s court at a higher level finds an
error in a judgment which has been given in any people’s court at a lower level, or the presiding judge
of a people’s court finds an error in a judgment which has been given in the court over which he
presides, the case may then be retried according to the judicial supervision procedures.

The PRC Civil Procedure Law (中華人民共和國民事訴訟法), which was adopted in 1991 and
amended in 2007 and 2012, sets forth the criteria for instituting a civil action, the jurisdiction of the
people’s courts, the procedures to be followed for conducting a civil action and the procedures for
enforcement of a civil judgment or ruling. All parties to a civil action conducted within the PRC must
comply with the PRC Civil Procedure Law. Generally, a civil case is initially heard by a local court
of the municipality or province in which the defendant resides. The parties to a contract may, by
express agreement, select a jurisdiction where civil actions may be brought, provided that the
jurisdiction is either the plaintiff ’s or the defendant’s place of residence, the place of execution or
implementation of the contract or the place of the object of the action, provided that the provisions
of this law regarding the level of jurisdiction and exclusive jurisdiction shall not be violated.

A foreign national or enterprise generally has the same litigation rights and obligations as a
citizen or legal person of the PRC. If a foreign country’s judicial system limits the litigation rights
of PRC citizens and enterprises, the PRC courts may apply the same limitations to the citizens and
enterprises of that foreign country within the PRC. If any party to a civil action refuses to comply with
a judgment or ruling made by a people’s court or an award made by an arbitration panel in the PRC,
the other party may apply to the people’s court for the enforcement of the same. There is a time limit
of two years imposed on the right to apply for such enforcement. If a person fails to satisfy a judgment
made by the court within the stipulated time, the court will, upon application by either party,
mandatorily enforce the judgment in accordance with the law.

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

A party seeking to enforce a judgment or ruling of a people’s court against a party who is not
personally or whose property is not within the PRC, may apply to a foreign court with jurisdiction over
the case for recognition and enforcement of the judgment or ruling. A foreign judgment or ruling may
also be recognized and enforced by the people’s court according to PRC enforcement procedures if the
PRC has entered into, or acceded to, an international treaty with the relevant foreign country, which
provides for such recognition and enforcement, or if the judgment or ruling satisfies the court’s
examination according to the principle of reciprocity, unless the people’s court finds that the
recognition or enforcement of such judgment or ruling will result in a violation of the basic legal
principles of the PRC, its sovereignty or security, or non-compliance with social and public interest.

THE PRC COMPANY LAW, SPECIAL REGULATIONS AND MANDATORY PROVISIONS

A joint stock limited company which is incorporated in the PRC and seeking a listing on the
Hong Kong Stock Exchange is mainly subject to the following three laws and regulations in China:

• The Company Law of the People’s Republic of China (the “PRC Company Law”), which
was promulgated by the Standing Committee of the NPC on December 29, 1993, came into
effect on July 1, 1994, revised as of December 25, 1999, August 28, 2004, October 27, 2005
and December 28, 2013, respectively, and the latest revision of which was implemented on
March 1, 2014;

• The Special Regulations of the State Council Concerning the Floatation and Listing Abroad
of Shares by Joint Stock Limited Companies (國務院關於股份有限公司境外募集股份及上
市的特別規定) (the “Special Regulations”), which were promulgated by the State Council
on August 4, 1994 pursuant to Articles 85 and 155 of the PRC Company Law, and were
applicable to the overseas share subscription and listing of joint stock limited companies;
and

• The Mandatory Provisions in the Articles of Association of Joint Stock Limited Companies
to be Listed Overseas (到境外上市公司章程必備條款), which were promulgated by the
former Securities Committee of the State Council and the State Economic Restructuring
Commission on August 27, 1994, and stated the mandatory provisions which must be
incorporated into the articles of association of a joint stock limited company seeking an
overseas listing. As such, the Mandatory Provisions are set out in the Articles of
Association of the Company, the summary of which is set out in Appendix V of this
prospectus. Set out below is a summary of the major provisions of the PRC Company Law,
the Special Regulations and the Mandatory Provisions applicable to our Company.

General

A joint stock limited company refers to an enterprise legal person incorporated under the PRC
Company Law with its registered capital divided into shares of equal nominal value. The liability of
its shareholders is limited to the amount of shares held by them, and the liability of the company is
limited to the total value of all the assets it owns.

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Incorporation

A joint stock limited company may be incorporated by promotion or public subscription.

A joint stock limited company shall be incorporated by a minimum of two promoters while the
maximum number thereof shall be 200, and at least half of the promoters must have residences within
the PRC.

The promoters of a joint stock limited company must convene an inaugural meeting within 30
days after the issued shares have been fully paid up, and must give notice to all subscribers or make
an announcement of the date of the inaugural meeting 15 days before the meeting. The inaugural
meeting may be convened only with the presence of promoters or subscribers representing at least half
of the shares in the company. At the inaugural meeting, matters including the adoption of articles of
association and the election of members of the board of directors and members of the board of
supervisors of the company will be dealt with. All resolutions of the meeting require the approval of
subscribers with more than half of the voting rights present at the meeting. Within 30 days after the
conclusion of the inaugural meeting, the board of directors must apply to the registration authority for
registration of the establishment of the joint stock limited company. A company is formally
established, and has the status of a legal person, after the business license has been issued by the
relevant registration authority. Joint stock limited companies established by the subscription method
shall file the approval on the offering of shares issued by the securities administration department of
the State Council with the company registration authority for record.

A joint stock limited company’s promoters shall be liable for: (i) the payment of all expenses and
debts incurred in the incorporation process jointly and severally if the company cannot be
incorporated; (ii) the refund of subscription monies to the subscribers, together with interest, at bank
rates for a deposit of the same term jointly and severally if the company cannot be incorporated; and
(iii) damages suffered by the company as a result of the default of the promoters in the course of
incorporation of the company. According to the Provisional Regulations Concerning the Issuance and
Trading of Shares (股票發行與交易管理暫行條例) promulgated by the State Council on April 22,
1993 (which is only applicable to the issuance and trading of shares in the PRC and their related
activities), if a company is established by means of public subscription, the promoters of such
company are required to sign on the prospectus to ensure that the prospectus does not contain any
misrepresentation, serious misleading statements or material omissions, and assume joint and several
responsibility for it.

Registered Shares

Under the PRC Company Law, the shareholders may make capital contributions in cash, in kind
or by way of injection of assets, intellectual property rights, land use rights or other transferable
non-cash property based on their appraised value. Pursuant to the Special Regulations, overseas listed
and foreign invested shares issued shall be in registered form, denominated in Renminbi and
subscribed for in a foreign currency. Domestic shares issued shall be in registered form.

— IV-5 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Under the PRC Company Law, when a company issues shares in registered form, it shall maintain
a register of shareholders, stating the following matters:

• the name and domicile of each shareholder;

• the number of shares held by each shareholder;

• the serial numbers of shares held by each shareholder; and

• the date on which each shareholder acquired the shares.

Increase in Share Capital

According to the PRC Company Law, when the joint stock limited company issues new shares,
resolutions shall be passed by a shareholders’ general meeting, approving the class and number of the
new shares, the issue price of the new shares, the commencement and end of the new share issuance
and the class and amount of new shares to be issued to existing shareholders. When the company
launches a public issuance of new shares with the approval of the securities regulatory authorities
under the State Council, it shall publish a prospectus and financial accounts, and prepare the share
subscription form. After the new share issuance has been paid up, the change shall be registered with
the company registration authorities and an announcement shall be made.

Reduction of Share Capital

A company may reduce its registered capital in accordance with the following procedures
prescribed by the PRC Company Law:

• It shall prepare a balance sheet and a property list;

• The reduction of registered capital shall be passed by shareholders’ general meeting;

• It shall inform its creditors of the reduction in capital within ten days and publish an
announcement of the reduction in the newspaper within 30 days after the resolution
approving the reduction has been passed;

• Creditors may within 30 days after receiving the notice, or within 45 days of the public
announcement if no notice has been received, require the company to pay its debts or
provide guarantees covering the debts; and

• It shall apply to the relevant Industry and Commerce Administration for change in
registration of the reduction in registered capital.

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Repurchase of Shares

According to the PRC Company Law, a joint stock limited company shall not purchase its shares
other than for one of the following purposes: (i) to reduce registered capital; (ii) to merge with another
company that holds its shares; (iii) to grant its shares to its employees as incentives; and (iv) to
purchase its shares from shareholders who are against the resolution regarding the merger or division
with other companies in a shareholders’ general meeting.

The purchase of shares on the grounds set out in (i) to (iii) above shall require approval by way
of a resolution passed by the shareholders’ general meeting. Following the purchase of shares in
accordance with the foregoing, such shares shall be canceled within ten days from the date of purchase
in the case of (i) above and transferred or canceled within six months in the case of (ii) or (iv) above.
Shares acquired in accordance with (iii) above shall not exceed 5% of the total number of the
company’s issued shares. Such acquisition shall be financed by funds appropriated from the company’s
profit after tax, and the shares so acquired shall be transferred to the company’s employees within one
year.

Transfer of Shares

Shares held by shareholders may be transferred in accordance with the relevant laws and
regulations. Pursuant to the PRC Company Law, transfer of shares by shareholders shall be carried out
at a lawfully established securities exchange or in other manners stipulated by the State Council. No
modifications of registration in the share register caused by transfer of registered shares shall be
carried out within 20 days prior to the convening of shareholder’s general meeting or five days prior
to the base date for determination of dividend distributions. Where there are separate provisions by
law on alternation of registration in the share register of listed companies, those provisions shall
prevail. Pursuant to the Mandatory Provisions, no modifications of registration in the share register
caused by transfer of shares shall be carried out within 30 days prior to a company’s convening of
shareholder’s general meeting or five days prior to any base date for determination of dividend
distributions.

Under the PRC Company law, shares issued prior to the public issuance of shares shall not be
transferred within one year from the date of the joint stock limited company’s listing on a stock
exchange. Directors, supervisors and the senior management shall declare to the company their
shareholdings in the company and any alternation of such shareholdings. They shall not transfer more
than 25% of all the shares they hold in the company annually during their tenure. They shall not
transfer the shares they hold within one year from the date of the company’s listing on a stock
exchange, nor within six months after their resignation from their positions within the company.

Finance and Accounting

Under the PRC Company Law, a company shall establish financial and accounting systems
according to laws, administrative regulations and the regulations of the financial department of the

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

State Council and shall at the end of each financial year prepare a financial report which shall be
audited by an accounting firm as required by law. The company’s financial and accounting report shall
be prepared in accordance with provisions of the laws, administrative regulations and the regulations
of the financial department of the State Council.

Pursuant to the PRC Company Law, a company shall deliver its financial and accounting reports
to all the shareholders within the time limit stipulated in the articles of association and make its
financial statements available at the company for inspection by the shareholders at least 20 days
before the convening of an annual general meeting of shareholders. It shall also publish its financial
statements.

When distributing each year’s after-tax profits, it shall set aside 10% of its after-tax profits into
a statutory reserve fund (except where the fund has reached 50% of its registered capital).

If the statutory reserve fund of a company is not sufficient to make up losses of the previous year,
profits of the current year shall be applied to make up losses before allocation is made to the statutory
reserve fund pursuant to the above provisions.

After allocation of the statutory reserve fund from after-tax profits, it may, upon a resolution
passed by the shareholders’ general meeting, allocate discretionary reserve fund from after-tax profits.

The remaining after-tax profits after making up losses and allocation of reserve fund shall be
distributed in proportion to the number of shares held by the shareholders, unless otherwise stipulated
in the articles of association.

Shares held by the company shall not be entitled to any distribution of profit.

The premiums received through issuance of shares at prices above par value and other incomes
required by the finance authority of the State Council to be allocated to the capital reserve fund shall
be allocated to the company’s capital reserve fund.

The reserve fund of the company shall be applied to make up losses of the company, expand its
business operations or be converted to increase the registered capital of the company. However, the
capital reserve fund may not be applied to make good the company’s losses. Upon the conversion of
statutory reserve fund into capital, the balance of the statutory reserve fund shall not be less than 25%
of the registered capital of the company before such conversion.

The company shall have no other accounting books except the statutory accounting books. Its
assets shall not be deposited in any accounts opened in the name of an individual.

Appointment and Retirement of Accounting Firms

Pursuant to the PRC Company Law, the appointment or dismissal of accounting firms responsible
for the auditing of the company shall be determined by shareholders’ general meeting or board of
directors in accordance with provisions of articles of association. The accounting firm should be

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APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

allowed to make representations when the shareholders’ general meeting or board of directors
conducts a vote on the dismissal of the accounting firm. The company should provide true and
complete accounting evidences, books, financial and accounting reports and other accounting data to
the accounting firm that it employs without any refusal, withholding and misrepresentation. The
Special Regulations provide that a company shall employ an independent accounting firm complying
with the relevant regulations to audit its annual report and review and check other financial reports
of the company. The accounting firm’s term of office shall commence from their appointment at a
shareholders’ annual general meeting to the end of the next shareholders’ annual general meeting.

Distribution of Profits

According to the PRC Company Law, a company shall not distribute profits before losses are
covered and the statutory common reserve is drawn. Under the Mandatory Provisions, a company shall
appoint receiving agents on behalf of holders of the overseas listed and foreign invested shares to
receive on behalf of such shareholders dividends and other distributions payable in respect of their
overseas listed and foreign invested shares.

Dissolution and Liquidation

According to the PRC Company Law, a company shall be dissolved by reason of the following:
(i) the term of its operations set down in the articles of association has expired or other events of
dissolution specified in the articles of association have occurred; (ii) the shareholders’ general
meeting have resolved to dissolve the company; (iii) the company is dissolved by reason of merger or
division; (iv) the business license is revoked; the company is ordered to close down or be dissolved;
or (v) the company is dissolved by the people’s court in response to the request of shareholders
holding shares that represent more than 10% of the voting rights of all its shareholders, on the grounds
that the company suffers significant hardships in its operation and management that cannot be resolved
through other means, and that the ongoing existence of the company would bring significant losses for
shareholders.

In the event of (i) above, a company may carry on its existence by amending its articles of
association. The amendment of a company’s articles of association in accordance with provisions set
out above shall require approval of more than two-thirds of voting rights of shareholders attending a
shareholders’ general meeting.

Where the company is dissolved in the circumstances described in subparagraphs (i), (ii), (iv),
or (v) above, a liquidation group shall be established and the liquidation process shall commence
within 15 days after the occurrence of an event of dissolution.

The members of the company’s liquidation group shall be composed of its directors or the
personnel appointed by the shareholders’ general meeting. If a liquidation group is not established
within the stipulated period, creditors may apply to the people’s court, requesting the court to appoint
relevant personnel to form the liquidation group. The people’s court should accept such application
and form a liquidation group to conduct a liquidation in a timely manner.

— IV-9 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The liquidation group shall exercise the following powers during the liquidation period:

• to handle the company’s assets and to prepare a balance sheet and an inventory of the
assets;

• to notify creditors through notice or public announcement;

• to deal with the company’s outstanding businesses related to liquidation;

• to pay any tax overdue as well as tax amounts arising from the process of liquidation;

• to claim credits and pay off debts;

• to handle the company’s remaining assets after its debts have been paid off; and

• to represent the company in civil lawsuits.

The liquidation group shall notify the company’s creditors within ten days after its
establishment, and issue public notices in newspapers within 60 days. A creditor shall lodge his claim
with the liquidation group within 30 days after receiving notification, or within 45 days of the public
notice if he did not receive any notification. A creditor shall state all matters relevant to his creditor
rights in making his claim and furnish evidence. The liquidation group shall register such creditor
rights. The liquidation group shall not make any debt settlement to creditors during the period of
claim.

Upon liquidation of properties and the preparation of the balance sheet and inventory of assets
of a company, the liquidation group shall draw up a liquidation plan to be submitted to the
shareholders’ general meeting or people’s court for confirmation.

The company’s remaining assets after payment of liquidation expenses, wages, social insurance
expenses and statutory compensation, outstanding taxes and debts shall be distributed to shareholders
according to their shareholding proportion. It shall continue to exist during the liquidation period,
although it can only engage in any operating activities that are related to the liquidation. The
company’s properties shall not be distributed to the shareholders before repayment are made in
accordance to the foregoing provisions.

Upon liquidation of the company’s properties and the preparation of the balance sheet and
inventory of assets, if the liquidation group becomes aware that we do not have sufficient assets to
meet its liabilities, it shall apply to the people’s court for a declaration for bankruptcy.

Following such declaration, the liquidation group shall hand over all affairs of the liquidation to
the people’s court.

— IV-10 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Upon completion of the liquidation, the liquidation group shall submit a liquidation report to the
shareholders’ general meeting or the people’s court for verification. Thereafter, the report shall be
submitted to the registration authority of the Company in order to cancel the company’s registration,
and a public notice of its termination shall be issued. Members of the liquidation group are required
to discharge their duties honestly and in compliance with the relevant laws. Members of the
liquidation group shall be prohibited from abuse of their powers to accept bribes or other unlawful
income and from misappropriating the company’s properties.

A member of the liquidation group is liable to indemnify the company and its creditors in respect
of any loss arising from his willful or material default.

Overseas Listing

According to the Special Regulations, a company shall obtain the approval of the CSRC to list
its shares overseas. A company’s plan to issue overseas listed and foreign invested shares and domestic
shares which has been approved by the CSRC may be implemented by the board of directors of the
company by way of separate issues within 15 months after approval is obtained from the CSRC.

Loss of Share Certificates

If a share certificate in registered form is lost, stolen or destroyed, the shareholder in question
may apply, in accordance with the relevant provisions set out in the PRC Civil Procedure Law, to the
people’s court for a declaration that such certificate will no longer be valid. After the people’s court
declares the invalidity of such certificate, the shareholder may apply to the company for a replacement
share certificate. A separate procedure regarding the loss of overseas listed and foreign invested share
certificates is provided for in the Mandatory Provisions.

SECURITIES LAW AND REGULATIONS

The Securities Law took effect on July 1, 1999 and was revised for the first time on August 28,
2004, for the second time on October 27, 2005, for the third time on June 29, 2013 and for the fourth
time on August 31, 2014. The Securities Law comprehensively regulates activities in the PRC
securities market, regulating, among other things, the issue and trading of securities, takeovers by
listed companies, securities exchanges, securities companies and the duties and responsibilities of the
State Council’s securities regulatory authorities. The Securities Law provides that domestic
enterprises shall obtain prior approval from the State Council’s regulatory authorities to list its shares
outside the PRC.

The CSRC is the regulatory arm of the Securities Committee and is responsible for the drafting
of regulatory provisions of securities markets, supervising securities companies, regulating public
offers of securities by PRC companies in the PRC or overseas, regulating the trading of securities,
compiling securities-related statistics and undertaking relevant research and analysis.

Currently, the issue and trading of foreign issued shares (including H Shares) are mainly
governed by the rules and regulations promulgated by the State Council and the CSRC.

— IV-11 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

ARBITRATION AND ENFORCEMENT OF ARBITRAL AWARDS

The Arbitration Law of the People’s Republic of China (中華人民共和國仲裁法) (the


“Arbitration Law”) was passed by the Standing Committee of the NPC on August 31, 1994, became
effective on September 1, 1995 and was revised on August 27, 2009. Under the Arbitration Law, an
arbitration committee may, before the promulgation by the PRC Arbitration Association of arbitration
regulations, formulate interim arbitration rules in accordance with the Arbitration Law and the PRC
Civil Procedure Law. Where the parties have by agreement provided arbitration as the method for
dispute resolution, the people’s court will refuse to handle the case except when the arbitration
agreement is declared invalid.

The Listing Rules and the Mandatory Provisions require an arbitration clause to be included in
the articles of association of an issuer and, in the case of the Listing Rules, also in contracts between
the issuer and each of its directors and supervisors, to the effect that the parties will submit to
arbitration whenever any disputes or claims arise (i) between holders of shares and the issuer; (ii)
between holders of shares and the issuer’s directors, supervisors, manager or other senior management
officers; and (iii) between holders of shares and holders of domestic shares. Matters in arbitration
include any disputes or claims in relation to the issuer’s affairs or as a result of any rights or
obligations arising under its articles of association, the PRC Company Law or other relevant laws and
administrative regulations.

Where a dispute or claim of rights referred to in the preceding paragraph is referred to


arbitration, the entire claim or dispute shall be referred to arbitration, and all persons who have a cause
of action based on the same facts giving rise to the dispute or claim or whose participation is necessary
for the resolution of such dispute or claim, shall comply with the arbitration. Disputes in respect of
the definition of shareholder and disputes in relation to the issuer’s register of shareholders need not
be resolved by arbitration.

A claimant may elect for arbitration to be carried out at either the China International Economic
and Trade Arbitration Commission (the “CIETAC”) in accordance with its rules or the Hong Kong
International Arbitration Center (the “HKIAC”) in accordance with its Securities Arbitration Rules.
Once a claimant refers a dispute or claim to arbitration, the other party shall submit to the arbitral
body elected by the claimant. If the claimant elects for arbitration to be carried out at the Hong Kong
International Arbitration Center, any party to the dispute or claim may apply for a hearing to take place
in Shenzhen in accordance with the Securities Arbitration Rules of the Hong Kong International
Arbitration Center. Pursuant to the Arbitration Rules of China International Economic and Trade
Arbitration Commission (中國國際經濟貿易仲裁委員會仲裁規則) revised on February 3, 2012 and
took effect on May 1, 2012, the CIETAC accepts cases involving economic, trade and other disputes
of a contractual or non-contractual nature, based on an agreement of the parties, including disputes
related to Hong Kong. The CIETAC is based in Beijing, and has sub-commissions or centers in
Shenzhen, Shanghai, Tianjin and Chongqing.

— IV-12 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Under the Arbitration Law and the PRC Civil Procedure Law, an arbitral award is final and
binding on the parties. If a party fails to comply with an award, the other party to the award may apply
to the people’s court for enforcement. A people’s court may refuse to enforce an arbitral award made
by an arbitration commission if there is any procedural or membership irregularity specified by law
or the award exceeds the scope of the arbitration agreement or is outside the jurisdiction of the
arbitration commission.

A party seeking to enforce an arbitral award of a PRC arbitration panel against a party who, or
whose property, is not within the PRC, may apply to a foreign court with jurisdiction over the case
for enforcement. Similarly, an arbitral award made by a foreign arbitration body may be recognized
and enforced by the PRC courts in accordance with the principles of reciprocity or any international
treaty concluded or acceded to by the PRC. The PRC acceded to the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the “New York Convention”) adopted on June 10, 1958
pursuant to a resolution of the Standing Committee of the NPC passed on December 2, 1986. The New
York Convention provides that all arbitral awards made in a state which is a party to the New York
Convention must be recognized and enforced by other parties to the New York Convention, subject to
their rights to refuse enforcement under certain circumstances, including where the enforcement of the
arbitral award is against the public policy of the state to which the application for enforcement is
made. It was declared by the Standing Committee of the NPC simultaneously with the accession of
the PRC that (i) the PRC will only recognize and enforce foreign arbitral awards on the principle of
reciprocity and (ii) the PRC will only apply the New York Convention in disputes considered under
PRC laws to arise from contractual and non-contractual mercantile legal relations.

On June 18, 1999, an agreement was reached between Hong Kong and the Supreme People’s
Court of the PRC for the mutual enforcement of arbitral awards. Under the agreement, the
Arrangements of the Supreme People’s Court on the Mutual Enforcement of Arbitral Awards between
the Mainland and the Hong Kong Special Administrative Region (關於內地與香港特別行政區相互執
行仲裁裁決的安排) was passed by the Supreme People’s Court of the PRC and took effect on February
1, 2000. Pursuant to the aforesaid arrangement, awards made by PRC arbitral authorities according to
the Arbitration Law can be enforced in Hong Kong, and Hong Kong arbitration awards are also
enforceable in China.

MATERIAL DIFFERENCES BETWEEN CERTAIN MATTERS RELATING TO COMPANY


LAW FOR THE PRC AND HONG KONG

The company law of Hong Kong is primarily set out in the Companies Ordinance and
supplemented by common law. There are material differences between the company law of Hong Kong
and the Company Law applicable to a joint stock limited company incorporated under PRC laws,
which our Company is and will be subject to, particularly in respect of investor protection. Certain
of the material differences between the Company Law and the company law of Hong Kong which is
currently in force are summarized below. This summary, however, is not intended to be an exhaustive
comparison. It should also be noted that the summary relates only to joint stock limited companies
incorporated under the Company Law and that the summary and the information in it is current only
as at the date of this prospectus.

— IV-13 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Quorum

Under the Companies Ordinance, unless otherwise specified by a company’s articles of


association, the quorum for a general meeting is two members. For one member companies, one
member will be a quorum. The Company Law does not specify any quorum requirement for a general
meeting, but the Special Regulations and the Mandatory Provisions provide that our general meeting
may be convened when replies to the notice of that meeting have been received from Shareholders
whose Shares represent 50% of the voting rights at least 20 days before the proposed date of the
meeting. If that 50% level is not achieved, we must within five days notify our Shareholders by way
of a public announcement and we may hold the general meeting thereafter.

Notice of Meeting

Under the Company Law, notice convening a general meeting of a joint stock limited liability
company must be given not less than 20 days before the date of the meeting or, in the case of bearer
shares, the notice must be given not less than 30 days before the date of the meeting. Under the Special
Regulations and the Mandatory Provisions (to the extent they are applicable to our Company), 45
days’ written notice must be given to all our Shareholders and Shareholders who wish to attend the
meeting must reply in writing 20 days before the date of the meeting. For a Hong Kong limited
company, the minimum period of notice for a general meeting, where convened for the purpose of
considering ordinary resolutions, is 14 days and, where convened for the purpose of considering
special resolutions, is 21 days. The minimum notice period for an annual general meeting is also 21
days.

Voting

Under Hong Kong law, an ordinary resolution is passed by a simple majority of affirmative votes
cast by members present in person or by proxy at a general meeting and a special resolution is passed
by a majority of not less than three-fourths of votes cast by members present in person or by proxy
at a general meeting. Under the Company Law, the passing of any resolution requires more than
one-half of the votes held by shareholders present in person or by proxy at a general meeting, except
in cases of proposed amendments to the articles of association, an increase or a reduction of registered
capital, merger, division, dissolution or alteration of form of the company, which require two-thirds
of the votes held by shareholders present in person or by proxy at a general meeting.

Share capital

The registered share capital of a joint stock limited liability company incorporated under the
Company Law shall be the same as its issued share capital. For a Hong Kong company, the authorized
share capital may be larger than the issued share capital. Hence, the directors of a Hong Kong
company may, with the prior approval of the shareholders, if required, cause the company to issue new
shares. The Company Law does not have the concept of authorized share capital. Any increase in the
registered capital must be approved by the shareholders at a general meeting and by the relevant PRC
governmental and regulatory authorities (if applicable). Upon completion of the issuance of new
shares duly approved, the company shall register the increased share capital with the relevant State
Administration for Industry and Commerce.

— IV-14 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Under the Company Law, capital contributions may be in the form of monetary or non-monetary
assets (other than assets not permitted to be used as capital contributions under the relevant laws and
regulations). For non-monetary assets to be used as capital contributions, valuations must be carried
out to ensure no overvaluation or undervaluation of the assets. There is no such restriction on a Hong
Kong company under Hong Kong law.

Restrictions on shareholdings and transfer of shares

Under the Special Regulations, except otherwise permitted under the Provisional Measures on
Management of Investing in Overseas Securities by Qualified Domestic Institutional Investors《合格
境內機構投資者境外證券投資管理試行辦法》, H shares shall only be held and traded by overseas
investors. Hong Kong laws do not impose restrictions on individuals dealing in shares of Hong Kong
companies on the basis of his residence or nationality.

Under the Company Law, shares in a joint stock limited liability company held by its promoters,
directors and senior management cannot be transferred within certain periods. Shares in issue prior to
the company’s public offering cannot be transferred within one year from the listing date of its shares
on the stock exchange. There are no such restrictions under Hong Kong law although there are the
six-month lock-up on our Company’s issue of Shares and the 12-month lock-up on our Controlling
Shareholder’s disposal of Shares, as illustrated by the undertakings given by our Company to the Hong
Kong Stock Exchange as described in “Underwriting” in this prospectus.

Variation of class rights

The Company Law makes no specific provision relating to variation of class rights. However, the
Company Law states that the State Council can promulgate regulations relating to other kinds of
shares. The Mandatory Provisions contain detailed provisions relating to the circumstances which are
deemed to be variations of class rights and the approval procedures required to be followed in respect
thereof. These provisions have been incorporated in our Articles of Association, which are
summarized in Appendix V— “Summary of Articles of Association” in this prospectus.

Under the Companies Ordinance, no rights attached to any class of shares can be varied except
(i) with the approval of a special resolution of the holders of the relevant class at a separate meeting,
(ii) with the consent in writing of the holders of three-quarters in nominal value of the issued shares
of the class in question, (iii) by agreement of all the members of the company or (iv) if there are
provisions in company’s articles of association relating to the variation of those rights, then in
accordance with those provisions.

The Company, as required by the Hong Kong Listing Rules and the Mandatory Provisions, has
adopted in our Articles of Association provisions protecting class rights in a similar manner to those
found in Hong Kong law. Domestic Shares and Foreign Shares which are not listed on the Hong Kong
Stock Exchange and overseas listed Shares are of different classes from those defined in the Articles

— IV-15 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

of Association of the Company. The special procedures for voting by a class of Shareholders shall not
apply in the following circumstances:

(i) Where our Company issues, upon approval by a special resolution at a Shareholders’
general meeting, Domestic Shares and Foreign Shares which are not listed on stock
exchange once every 12 months, either separately or concurrently, and the respective
numbers of Domestic Shares and Foreign Shares which are not listed on the Hong Kong
Stock Exchange and overseas listed Shares proposed to be issued do not exceed 20% of the
respective numbers of the issued Domestic Shares and Foreign Shares which are not listed
on the Hong Kong Stock Exchange and Foreign Shares;

(ii) Where our Company’s plan to issue Domestic Shares and Foreign Shares which are not
listed on the Hong Kong Stock Exchange and overseas listed Shares at the time of
incorporation is carried out within 15 months from the date of approval by relevant the
securities regulatory authorities of the State Council; and

(iii) Where upon the approval from the securities authorities of the State Council, the Domestic
Shares and Foreign Shares which are not listed on the Hong Kong Stock Exchange may be
listed and traded in an overseas stock exchange.

Derivative actions by minority shareholders

Hong Kong law permits minority shareholders to commence a derivative action on behalf of the
company against directors who have committed a breach of their fiduciary duties to the company if
the directors control a majority of votes at a general meeting, thereby effectively preventing the
company from suing the directors in breach of their duties in its own name.

The Company Law gives our Shareholders the rights to initiate proceedings in the people’s courts
in the PRC to restrain the implementation of any resolution passed by our Shareholders in a general
meeting, or by the meeting convening procedures or ways of voting of the meetings of our Board of
Directors, that violates any law, administrative rules or Articles of Association or company’s articles
of association, or if our Directors or senior management violate laws, administrative rules or Articles
of Association when performing their duties and cause losses to our Company. The Mandatory
Provisions also provide us with certain remedies against our Directors and senior management who
breach their duties to us. In addition, as a condition to the listing of our Shares on the Hong Kong
Stock Exchange and in accordance with our Articles of Association, each of our Directors is required
to give an undertaking in favor of us acting as agent for each of our Shareholders. This allows minority
Shareholders to act against our Directors in events of default.

Minority shareholder protection

Under Hong Kong law, a shareholder who complains that the affairs of a company incorporated
in Hong Kong are conducted in a manner unfairly prejudicial to his interests may petition to the court

— IV-16 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

to either wind up the company or make an appropriate order regulating the affairs of the company. In
addition, on the application of a specified number of members, the Financial Secretary of Hong Kong
may appoint inspectors who are given extensive statutory powers to investigate the affairs of a
company incorporated in Hong Kong.

As required by the Mandatory Provisions, the Company shall adopt in our Articles of Association
provisions for minority shareholder protection similar to (though not as comprehensive as) those
available under the Hong Kong law. These provisions state that a Controlling Shareholder may not
exercise its voting rights in a manner prejudicial to the interests of other Shareholders, may not relieve
a Director or Supervisor of his duty to act honestly in our best interests or may not approve the
expropriation by a Director or Supervisor of our assets or the individual rights of other Shareholders.

Dividends

The Company shall withhold, and pay to the relevant tax authorities, the PRC tax on any
dividends or other distributions payable to a Shareholder. Under Hong Kong law, the limitation period
for debt recovery action (including the recovery of dividends) is six years while that under PRC laws
is two years.

Financial disclosure

A joint stock limited liability company is required under the Company Law to make available at
its office for inspection by shareholders its financial reports 20 days before an annual general meeting.
In addition, a company issuing share certificates to the public under the Company Law must publish
its financial statements. The annual balance sheet shall be verified by registered accountants. The
Companies Ordinance requires a company to send to every shareholder a copy of its balance sheet,
auditors’ report and directors’ report, which are to be tabled before the company at its annual general
meeting, not less than 21 days before such meeting.

Under the Articles of Association (as required by the Hong Kong Listing Rules and the
Mandatory Provisions), in addition to preparing accounts according to the PRC accounting standards,
the Company may also have its accounts prepared and audited in accordance with the international
accounting standards or Hong Kong accounting standards. Our Company is further required to publish
our interim and annual accounts within 90 days from the end of the first six months of a financial year
and within 120 days from the end of a financial year, respectively. The Special Regulations require
that there should not be any inconsistency between the information disclosed within and outside the
PRC and that, to the extent that there are differences in the information disclosed in accordance with
the relevant PRC and overseas laws, regulations and requirements of the relevant stock exchanges,
such differences should also be disclosed simultaneously.

— IV-17 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Information on Directors and Shareholders

The Company Law gives Shareholders the rights to inspect our Articles of Association, minutes
of the Shareholders’ general meetings and financial and accounting reports. Under our Articles of
Association, Shareholders have the rights to inspect and copy (at reasonable charges) certain
information on Shareholders and on Directors like those available to shareholders of Hong Kong
companies under Hong Kong law.

Corporate reorganization

Corporate reorganization involving a company incorporated in Hong Kong may be effected in a


number of ways, such as a transfer of the whole or part of the business or property of the company
in the course of being wound up voluntarily to another company pursuant to section 237 of the Hong
Kong Companies (Winding Up and Miscellaneous Provisions) Ordinance or a compromise or
arrangement between the company and its creditors or between the company and its members pursuant
to section 673, Division 2 of Part 13 of the Companies Ordinance which requires the sanction of the
court. Under PRC laws, the merger or demerger of a joint stock limited liability company shall be
approved by voting by two-thirds of shareholders attending the general meeting in person or by proxy,
and also shall be approved by the relevant government authorities (where applicable).

Remedies of our Company

Under the Company Law, if a Director, Supervisor or senior management contravenes any law
or administrative regulation or our Articles of Association in the performance of his duties resulting
in loss to our Company, such Director, Supervisor or senior management shall be liable to our
Company for such loss. In addition, in compliance with the Mandatory Provisions, our Articles of
Association set out our remedies similar to those required by the Hong Kong law (including
cancellation of the relevant contract and recovery of profits made by a director, supervisor or officer).

Arbitration of disputes

In Hong Kong, disputes between shareholders and a company or its directors, supervisors and
other senior officers may be resolved through the courts. The Mandatory Provisions and our Articles
of Association provide that disputes between a holder of overseas listed Shares and the Company and
our Directors, Supervisors, managers and other senior management and a holder of Domestic Shares
and Foreign Shares which are not listed on the Hong Kong Stock Exchange, arising from our Articles
of Association, the Company Law or other relevant laws and administrative regulations which concern
the affairs of the Company should, with certain exceptions, be referred to arbitration at either the
China International Economic and Trade Arbitration Commission or the Hong Kong International
Arbitration Center. Such arbitration is final and conclusive.

— IV-18 —
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Financial assistance for acquisition of shares

The Company Law does not contain any provision prohibiting or restricting a joint stock limited
liability company or its subsidiaries from providing financial assistance for the purpose of an
acquisition of its own or its holding company’s shares. The Mandatory Provisions contain certain
restrictions on a company and its subsidiaries providing such financial assistance similar to those
under the Companies Ordinance.

Mandatory deductions

Under the Company Law, a joint stock limited liability company is required to make transfers
equivalent to certain prescribed percentages of its after-tax profit to the statutory capital reserve fund.
There are no such requirements under Hong Kong law.

— IV-19 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Summary of the Articles of Association

This appendix contains a summary of the Articles of Association. The principal objective is to
provide potential investors with an overview of the Articles of Association. As the information
contained below is in a summary form, it does not contain all the information that may be important
to potential investors. As stated in “Appendix VII — Documents Delivered to the Registrar of
Companies and Available for Inspection”, a copy of the Articles of Association is available for
inspection.

The Articles of Association and relevant amendments thereto were adopted by our shareholders
at shareholders’ general meetings in accordance with applicable laws and regulations, including the
PRC Company Law, the Securities Law of the PRC, the Circular on Opinions concerning
Supplementary Amendments to Articles of Association of Companies Listed in Hong Kong 《 ( 關於到
香港上巿公司對公司章程作補充修改的意見的通函》), the Special Regulations, the Mandatory
Provisions and the Listing Rules and have been approved by the China Insurance Regulatory
Commission. The Articles of Association will become effective on the date that the H Shares are listed
on the Hong Kong Stock Exchange.

Directors and Other Officers

Power to Allot and Issue Shares

There is no provision in the Articles of Association empowering directors to allot and issue
Shares.

To increase the capital of the Company, the board of directors is responsible for formulating
proposals for approval at a shareholders’ general meeting by way of special resolution. Any such
increase must be conducted in accordance with the procedures stipulated by relevant laws and
administrative regulations.

Power to Dispose of Fixed Assets

The board of directors is accountable to the shareholders’ general meeting.

The board of directors shall not, without prior approval or consent by shareholders’ general
meeting, dispose or agree to dispose of any fixed assets of the Company where the anticipated value
of the assets to be disposed of, together with the value of any fixed assets of the Company that has
been disposed of in the period of four (4) months immediately preceding the proposed disposition,
exceeds 33% of the value of the Company’s fixed assets as shown in the last balance sheet placed
before the shareholders’ general meeting.

The validity of a disposal by the Company of fixed assets shall not be affected by a breach of
the above paragraph.

For the purposes of the Articles of Association, a disposal of fixed assets includes an act
involving the transfer of an interest in assets other than the provision of fixed assets as security.

— V-1 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Compensation or Payments for Loss of Office

The contracts concerning emoluments between the Company and its directors or supervisors
should provide that, in the event of an acquisition of the Company, the directors and supervisors shall,
subject to prior approval by the shareholders’ general meeting, have the right to receive compensation
or other payments for loss of office or retirement. The acquisition of the Company referred to in this
paragraph means either:

(I) a takeover offer made by any person to all shareholders; or

(II) a takeover offer made by any person to enable the offeror to become a controlling
shareholder.

A controlling shareholder means a person who satisfies any one of the following conditions: (i)
he alone, or acting in concert with others, has the power to elect more than half of the board of
directors; (ii) he alone, or acting in concert with others, has the power to exercise or to control the
exercise of 30% or more of the voting rights in the Company; (iii) he alone, or acting in concert with
others, holds 30% or more of the issued and outstanding shares of the Company; or (iv) he alone, or
acting in concert with others, in any other manner has de facto control of the Company.

If the relevant director or supervisor does not comply with above provisions, any sum so received
by the director or supervisor shall belong to those persons who have sold their shares as a result of
the offer, and the expenses incurred in distributing that sum pro rata among those persons shall be
borne by the relevant director or supervisor and not deducted from the sum distributed.

Loans to Directors, Supervisors and Other Officers

The Company shall not directly or indirectly make a loan to, or provide any security in
connection with, the making of a loan to a director, supervisor or member of senior management of
the Company or its parent company or any of their respective related persons. However, the following
transactions are not subject to such prohibition:

• The provision by the Company of a loan or a security of a loan to a company which is a


subsidiary of the Company;

• The provision by the Company of a loan or a security in connection with the making of a
loan or any other funds to any of its directors, supervisors or members of senior
management for them to pay for expenditure incurred by him/her for the purposes of the
Company or for the purpose of enabling him/her to perform his/her duties, in accordance
with a service contract approved by the shareholders’ general meeting; and

• The provision by the Company of a loan or a security in connection with the making of a
loan to any of the relevant directors, supervisors, members of senior management and their
respective related persons on normal commercial terms, provided that the ordinary course
of business of the Company includes the lending of money or the provision of a security
of a loan.

— V-2 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

A loan made by the Company in breach of the above provisions shall be forthwith repayable by
the recipient of the loan, regardless of the terms of the loan. A security provided by the Company in
breach of the above provisions shall be unenforceable against the Company, unless:

1. the security was provided in connection with a loan to a related person of any of the
directors, supervisors or members of senior management of the Company or its parent
company and at the time the loan was advanced the lender did not know the relevant
circumstances; or

2. the collateral provided by the Company has been lawfully sold by the lender to a bona fide
purchaser.

The security referred to in the preceding paragraphs shall include the undertaking of obligations
or provision of property by the guarantor to secure the performance of obligations by the obligor.
These Articles of Association do not have any special provisions regarding the manner in which the
Directors may exercise the right to borrow money.

Financial Assistance for the Acquisition of Shares in the Company or any of its Subsidiaries

Subject to the exceptions in the Articles of Association, the Company and its subsidiaries shall
not, by any means at any time, provide any kind of financial assistance to a person who is acquiring
or is proposing to acquire shares of the Company. The said acquirer of shares of the Company includes
a person who directly or indirectly incurs any obligations due to the acquisition of the shares. The
Company and its subsidiaries shall not, by any means at any time, provide financial assistance to the
said acquirer for the purpose of reducing or discharging the obligations assumed by that person.

Without prejudice to the laws, regulations and normative documents, the following acts shall not
be deemed to be prohibited:

• the provision of financial assistance by the Company where the financial assistance is given
in good faith in the interest of the Company, and the main purpose of the financial
assistance is not the acquisition of shares of the Company, or the financial assistance is an
incidental part of an overall plan of the Company;

• the lawful distribution of the Company’s assets by way of dividend in accordance with law;

• the allotment of bonus shares as dividends;

• a reduction of registered capital, a repurchase of shares of the Company or an adjustment


of the shareholding structure of the Company effected in accordance with the Articles of
Association;

• the provision of a loan by the Company for its normal business activities within its business
scope (provided that the net assets of the Company are not thereby reduced or, to the extent
that the net assets are thereby reduced, the financial assistance is provided out of
distributable profits); and

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

• the provision of money by the Company for contributions to the employee share scheme
(provided that the net assets of the Company are not thereby reduced or, to the extent that
the net assets are thereby reduced, the financial assistance is provided out of distributable
profits).

For these purposes, financial assistance includes, but is not limited to, the following:

(1) gifts;

(2) security (including the assumption of liability by the guarantor or the provision of property
by the guarantor to secure the performance of obligations by the obligor), compensation
(other than compensation incurred by the Company’s own default) or release or waiver of
any rights;

(3) provision of a loan or entry into of a contract under which the obligations of the Company
are to be fulfilled before the obligations of other parties, or a change in the parties to, or
the assignment of rights under, such loan or agreement; or

(4) any other form of financial assistance given by the Company when the Company is unable
to pay its debts or has no net assets or when its net assets would thereby be reduced by a
material extent.

Incurring an obligation includes the incurring of obligations by the changing of the obligor’s
financial position by way of contract or the making of an arrangement (whether enforceable or not,
and whether made on the obligor’s own account or together with any other persons) or by any other
means.

Disclosure of Interests in Contracts with the Company or any of its Subsidiaries

Where a director, supervisor or member of senior management of the Company is, directly or
indirectly, materially interested in a contract, transaction or arrangement or proposed contract,
transaction or arrangement with the Company (other than his/her contract of service with the
Company), he shall declare the nature and extent of his/her interests to the board of directors at the
earliest opportunity, regardless whether or not such contract, transaction or arrangement is subject to
approval by the board of directors under normal circumstances.

Unless the interested director, supervisor or member of senior management of the Company
discloses his/her interests to the board of directors in accordance with the requirements of the
preceding paragraph and the contract, transaction or arrangement is approved by the board of directors
at a meeting in which the interested director, supervisor or member of senior management is not
counted in the quorum and refrained from voting, the contract, transaction or arrangement is voidable
at the option of the Company except as against a bona fide party thereto acting without notice of the
breach of duty by the interested director, supervisor or member of senior management.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

A director, supervisor or member of senior management of the Company shall be deemed to be


interested in a contract, transaction or arrangement in which a related person of his/hers is interested.

Where before the question of entering into the relevant contract, transaction or arrangement is
first taken into consideration by the Company, a director, supervisor or member of senior management
of the Company gives the board of directors a notice in writing stating that, by reason of the facts
specified in the notice, he/she is interested in the contracts, transactions or arrangements that may be
made subsequently by the Company, such director, supervisor or member of senior management shall
be deemed to have made the disclosure specified in the preceding paragraphs to the extent stated in
such notice.

Remuneration

The Company shall, with prior approval by shareholders in general meeting, enter into a contract
in writing with each of its directors, supervisors and members of senior management in respect of
remunerations. The contract in writing shall at least include:

(i) remunerations for them as directors, supervisors or members of senior management of the
Company;

(ii) remunerations for them as directors, supervisors or members of senior management of any
subsidiary of the Company;

(iii) remunerations otherwise in connection with services for the management of the Company
or its subsidiaries; and

(iv) payments by way of compensation for loss of office, or in connection with their retirement
from office.

Save as specified in the contract mentioned above, no proceedings shall be brought by a director
or supervisor against the Company for anything due to him in respect of the matters specified above.
These Articles of Association do not have any special provisions regarding any power enabling the
directors, in the absence of an independent quorum, to vote remuneration (including pension or other
benefits) to themselves or any members of their body and any other provision as to the remuneration
of the directors.

Appointment, Removal and Retirement

The term of office of the chairman of the board of directors and other board members shall be
three years. If the term of appointment of a director expires and he is re-elected, the director may be
reappointed for a consecutive term.

Directors shall be elected and removed by shareholders’ general meeting. The Company in
shareholders’ general meeting shall have power by ordinary resolution to remove any director
(including a managing director or other executive director) before the expiration of his/her period of
office, but without prejudice to any claim of such director for damages under any contract.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

A notice of the intention to propose a candidate for election as a director and a notice by that
candidate stating his willingness to be elected shall be served on the Company at least seven (7) days
before the date of the general meeting. The timeframe for the delivery of the notices shall commence
from the date when a notice of meeting in respect of such election is dispatched and end no later than
seven (7) days prior to the date of such meeting.

Candidates for directors shall be resolved at a shareholders’ general meeting by way of a


proposal. The board of directors, the supervisory committee or any shareholder who individually or
jointly holds 3% or more of the shares of the Company may make proposals to nominate candidates
for directors. In respect of the nomination of candidates for directors, the nominator shall provide
specific explanations to the shareholders’ general meeting on the qualifications and professional
experience of the candidates.

If a director departs due to expiration of term of office, the director shall submit a resignation
report to the board of directors, explaining the performance of his/her duties during the term of office,
and hand over all works on hand.

If a director departs due to reasons other than expiration of term of office, the director shall, in
addition to complying with the requirements of the preceding paragraph, give specific reasons for the
resignation in the resignation report and shall submit the resignation report to the Company’s
supervisory committee for filing.

Upon listing of the Company, necessary amendments shall be made in a shareholders’ general
meeting to the rules governing the election and nomination of directors and the composition of board
of directors in accordance with relevant laws, regulations and the listing rules of the stock exchange
where the Company is listed.

The appointment of directors shall be subject to the approval on the directors’ qualifications from
the China Insurance Regulatory Commission. If the director proposed to be appointed fails to obtain
the approval on qualifications, the general meeting shall conduct a re-election to fill the vacancy of
the position according to the re-nomination from the shareholders who have the right to nominate the
director.

A director’s term of office starts from the date of his/her inauguration and expires at the end of
the term of the prevailing session of the board of directors. Prior to the expiration of a director’s term
of office, the general meeting shall not dismiss him/her without reason.

In circumstances provided by laws, regulations or the Articles of Association, the shareholders’


general meeting may by an ordinary resolution remove any director whose term of office has not
expired, but such removal does not affect the rights of such director to make any claim for
compensation under any contract.

If the term of office of a director expires but re-election is not made immediately, the said
director shall continue fulfilling the duties as director pursuant to relevant laws, administrative
regulations, departmental rules and the Articles of Association until a new director is elected.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

A person may not serve as a director, supervisor or member of senior management of the
Company if any of the following circumstances apply:

(I) a person without or with restricted capacity of civil conduct;

(II) a person who has committed an offence of corruption, bribery, infringement of property,
misappropriation of property or sabotaging the social economic order and has been
punished for committing such offence; or who has been deprived of his/her political rights,
in each case where no more than five (5) years have elapsed since the date of the completion
of implementation of such punishment or deprivation;

(III) a person who is a former director, factory manager or manager of a company or enterprise
which has entered into insolvent liquidation because of mismanagement and who is
personally liable for the insolvency of such company or enterprise, where no more than
three (3) years have elapsed since the date of the completion of the insolvency and
liquidation of such company or enterprise;

(IV) a person who is a former legal representative of a company or enterprise which had its
business license revoked due to a violation of laws and who incurred personal liability
therefor, where no more than three (3) years have elapsed since the date of the revocation
of the business license;

(V) a person who has a relatively large amount of debts due and outstanding;

(VI) a person who is under criminal investigation or prosecution by judicial organs for violation
of criminal law and the case is not yet concluded;

(VII) a person who has been prohibited from serving as a leader of an enterprise by laws or
administrative regulations;

(VIII) a non-natural person;

(IX) a person who has been convicted by the relevant competent authority for violation of
relevant securities regulations, and such conviction involves a finding that such person has
acted fraudulently or dishonestly, where less than five (5) years have elapsed from the date
of such conviction; or

(X) circumstances prescribed by laws, administrative regulations, regulatory requirements, the


Articles of Association and the securities regulatory authorities of the place where the
shares of the Company are listed and circumstances where a person is deemed inappropriate
by the China Insurance Regulatory Commission and other regulatory authorities to serve as
a director, supervisor or member of senior management.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

There is no provision in the Articles of Association which imposes any age limit for directors
beyond which retirement from the directorship is mandatory. There is no provision in the Articles of
Association which requires a Director to hold any shares in the Company by way of qualification.

Each of the Company’s directors, supervisors and members of senior management owes a duty,
in the exercise of his/her rights or the discharge of his/her duties, to exercise the care, diligence and
skill that a reasonably prudent person would exercise in comparable circumstances. Each of the
Company’s directors, supervisors and members of senior management shall carry on his/her duties in
accordance with the fiduciary principle and shall not put himself/herself in a position where his/her
duty and his/her interest may conflict. This principle includes (but is not limited to) discharging the
following obligations:

• to act honestly in the best interests of the Company;

• to exercise powers within the scope of his/her powers and not to exceed those powers;

• to exercise the discretion vested in him/her personally and not to allow himself/herself to
act under the control of another and, except to the extent permitted by laws, administrative
regulations or with informed consent of shareholders’ general meeting, not to delegate the
exercise of his/her discretion to others;

• to treat shareholders of the same class equally and to treat shareholders of different classes
fairly;

• except in accordance with the Articles of Association or with informed consent of


shareholders’ general meeting, not to enter into any contract, transaction or arrangement
with the Company;

• without informed consent of shareholders’ general meeting, not to use the Company’s
property by any means for his/her own benefit;

• not to exploit his/her position to accept bribes or other illegal income or expropriate the
Company’s property by any means, including (but not limited to) opportunities
advantageous to the Company;

• without informed consent of shareholders’ general meeting, not to accept commissions in


connection with the Company’s transactions;

• to abide by the Articles of Association, faithfully perform his/her duties and protect the
Company’s interests, and not to exploit his/her position and power in the Company to
advance his/her own private interests;

• not to compete with the Company in any form without informed consent of shareholders’
general meeting;

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

• not to misappropriate the Company’s funds or lend such funds to others, not to open
accounts in his/her own name or other names for the deposit of the Company’s assets and
not to provide a security for debts of a shareholder of the Company or other individual(s)
with the Company’s assets;

• without informed consent of shareholders’ general meeting, not to disclose any confidential
information in respect of the Company acquired by him/her in the course of and during
his/her tenure of office and not to use the information other than for the purpose of the
interests of the Company, save that disclosure of such information to the court or other
governmental authorities is permitted if: (i) disclosure is required by law; (ii) the interests
of the public require disclosure; or (iii) the interests of the relevant director, supervisor or
member of senior management require disclosure.

Each director, supervisor or member of senior management of the Company shall not cause the
following persons or institutions (“Related Persons”) to do what he is prohibited from doing:

(1) the spouse or minor children of that director, supervisor or member of senior management;

(2) a trustee of that director, supervisor or member of senior management or any person
referred to in paragraph (1);

(3) a partner of that director, supervisor or member of senior management or any person
referred to in paragraphs (1) and (2) above;

(4) a company in which that director, supervisor or member of senior management, alone or
jointly with one or more persons referred to in paragraphs (1), (2) and (3) above and other
directors, supervisors and members of senior management have a de facto controlling
interest; and

(5) the directors, supervisors, general manager and other members of senior management of the
controlled company referred to in the preceding paragraph.

The fiduciary duties of the director, supervisor or member of senior management of the Company
do not necessarily cease upon the termination of their tenure. The duty of confidence in relation to
trade secrets of the Company survives the termination of their tenure. Other duties may continue for
such period on a fair basis depending on the time lapse between the termination and the act concerned
and the circumstances and conditions under which the relationships between them and the Company
are terminated.

In addition to any rights and remedies provided by laws and administrative regulations, where
a director, supervisor or member of senior management of the Company is in breach of his/her duties
to the Company, the Company has a right to:

• claim damages from the director, supervisor or member of senior management in


compensation for losses sustained by the Company as a result of his/her neglect of duties;

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

• rescind any contract or transaction entered into by the Company with the director,
supervisor or member of senior management or with a third party (where such third party
knows or should know that there is such a breach of duties by such director, supervisor or
member of senior management);

• require the relevant director, supervisor or member of senior management to return the
benefits received by him/her as a result of the breach of the obligations;

• recover any funds received by the director, supervisor or member of senior management
that should have been received by the Company, including (but not limited to)
commissions; and

• require the relevant director, supervisor or member of the senior management to return the
interest that is earned or may have been earned from the fund which should have been
payable to the Company.

Alterations to Constitutional Documents

The Company may amend its terms of reference and the Articles of Association in accordance
with the requirements of laws, administrative regulations and the Articles of Association. Upon
occurrence of any of the following events, the Company shall amend the Articles of Association within
three (3) months:

(1) the Articles of Association is contradictory to amended version of the Company Law, the
Insurance Law or other applicable laws, regulations, normative documents or regulatory
provisions;

(2) there is any change to the fundamental matters recorded in the Articles of Association or
relevant rights, obligations, duties, procedural rules under the Articles of Association; or

(3) it is resolved at a shareholders’ general meeting to amend the Articles of Association.

Amendments to the Articles of Association involving the contents of the Mandatory Provisions
for Articles of Association of Companies to be Listed Overseas 《 ( 到境外上市公司章程必備條款》)
shall become effective upon approvals by the companies approving department authorized by the State
Council and the securities regulatory authorities of the State Council. If there is any change relating
to the registered particulars of the Company, application shall be made for registration of the changes
in accordance with law.

Variation of Rights of Existing Shares or Classes of Shares

Apart from the holders of other classes of shares, holders of domestic shares and holders of
overseas listed shares of the Company are deemed to be in different classes of shareholders. Holders
of unlisted foreign shares and domestic shares are in the same class of shareholders. All classes of
shareholders of the Company shall rank pari passu with each other in any distribution made in the
form of dividends or in other forms.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Rights conferred on any class of shareholders in the capacity of shareholders (“class rights”) may
not be varied or abrogated unless approved by a special resolution of shareholders’ general meeting
and by holders of shares of that class at a separate meeting conducted in accordance with the Articles
of Association.

The following circumstances shall be deemed to be a variation or abrogation of the class rights
of a class of shareholders:

(1) to increase or reduce the number of shares of that class or to increase or reduce the number
of shares of another class which carries the same or more voting rights, distribution right
or other privileges;

(2) to effect an exchange of all or part of the shares of such class into shares of another class
or to effect an exchange or create a right of exchange of all or part of the shares of another
class into the shares of such class;

(3) to remove or reduce rights to accrued dividends or rights to cumulative dividends attached
to shares of such class;

(4) to reduce or remove a preference to dividend or a preference to asset distribution in


liquidation attached to shares of such class; to reduce or remove a dividend preference or
a liquidation preference attached to shares of such class;

(5) to add, remove or reduce conversion privileges, options, voting rights, transfer or
pre-emptive rights, or rights to acquire securities of the Company attached to shares of such
class;

(6) to remove or reduce rights to receive payment payable by the Company in particular
currencies attached to Shares of such class;

(7) to create a new class of shares having voting or distributing rights or other privileges equal
or superior to those of the shares of such class;

(8) to restrict the transfer or ownership of the shares of such class or create such restriction;

(9) to issue rights to subscribe for, or convert into, shares of such class or another class;

(10) to increase the rights or privileges of shares of other classes;

(11) to conduct the proposed restructuring of the Company in such a way that may result in the
holders of different classes of shares to assuming liability disproportionately; and

(12) to vary or abrogate provisions of the Articles of Association.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Shareholders of the affected class, whether or not otherwise entitled to vote at shareholders’
general meetings, shall nevertheless be entitled to vote at class meetings in respect of matters
concerning sub paragraphs (2) to (8), (11) to (12) above, but interested shareholder(s) shall not be
entitled to vote at class meetings.

The meaning of interested shareholder(s) as mentioned in the preceding paragraph is:

(I) in the case of a repurchase by the Company of its own shares by pro rata offers to all
shareholders or public dealing on a stock exchange, an “interested shareholder” refers to a
controlling shareholder;

(II) in the case of a repurchase by the Company of its own shares by an agreement outside the
stock exchange, an “interested shareholder” refers to the shareholder who is related to the
agreement;

(III) in the case of a restructuring of the Company, an “interested shareholder” refers to a


shareholder within a class who bears less than a proportionate burden imposed on that class
under the proposed restructuring or who has an interest in the proposed restructuring
different from the interest of other shareholders of that class.

The quorum for a separate class meeting to consider a variation of the rights of any class of
shares shall be the holders of at least one third (1/3) of the issued shares of that class.

Resolutions of a class of shareholders shall be passed by votes representing more than two thirds
(2/3) of the voting rights represented at the relevant meeting who are entitled to vote at class meetings.

Written notice of a class meeting shall be given forty-five (45) days before the date of the class
meeting to notify all of the shareholders in the share register of the class of the matters to be
considered and the date and the place of the class meeting. A shareholder who intends to attend the
class meeting shall deliver his/her written reply concerning attendance at the class meeting to the
Company twenty (20) days before the date of the class meeting.

If the number of shares carrying voting rights at the meeting represented by the shareholders who
intend to attend the class meeting reaches more than half of the voting shares at the class meeting, the
Company may hold the class meeting; if not, the Company shall within five (5) days notify the
shareholders of the class, by public announcement, of the matters to be considered, the date and the
place for the class meeting. The Company may then hold the class meeting after publication of such
notice.

Notice of class meetings need only be served on shareholders entitled to vote thereat.

Unless otherwise provided in the Articles of Association, meetings of any class of shareholders
shall be conducted in a manner as similar as possible to that of shareholders’ general meetings. The
provisions of the Articles of Association relating to the manner of conducting any shareholders’
general meeting shall apply to any meeting of a class of shareholders.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

The special procedures for voting by class shareholders shall not apply in the following
circumstances:

(1) where the Company issues, upon the approval by special resolution of its shareholders in
a shareholders’ general meeting, either separately or concurrently once every twelve (12)
months, not more than 20% of each of its existing issued domestic shares and overseas
listed shares;

(2) where the Company’s plan to issue domestic shares and overseas listed shares at the time
of its establishment is carried out within fifteen (15) months from the date of approval of
the securities regulatory authority of the State Council; and

(3) where upon the approval from the securities regulatory authority of the State Council, the
shareholders of unlisted shares of the Company cause the unlisted shares held by them to
be listed and traded on an overseas stock exchange.

Resolutions Majority Required

Resolutions of shareholders’ general meetings shall be divided into ordinary resolutions and
special resolutions.

To adopt an ordinary resolution, votes representing more than half of the voting rights
represented by the shareholders (including proxies) present at the meeting must be exercised in favor
of the resolution.

To adopt a special resolution, votes representing more than two thirds of the voting rights
represented by the shareholders (including proxies) present at the meeting must be exercised in favor
of the resolution.

Voting Rights (Generally, on a Poll and Right to Demand a Poll)

Shareholders who are entitled to attend and vote at shareholders’ general meetings may attend
in person or appoint one or more proxies (who need not be shareholders) to attend and vote at
shareholders’ general meetings. A shareholder (including proxy) when voting at a shareholders’
general meeting may exercise voting rights in accordance with the number of shares carrying the right
to vote and each share shall have one vote.

Any vote of shareholders at a shareholders’ general meeting must be taken by poll except where
the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or
administrative matter to be voted on by a show of hands.

A poll demanded on such matters as the election of Chairman or the adjournment of the meeting,
shall be taken forthwith. A poll demanded on any other matters shall be taken at such time as the
Chairman may decide, and the meeting may proceed to discuss other matters, while the results of the
poll shall still be deemed to be a resolution of that meeting.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

On a poll taken at a meeting, a shareholder (including proxy) entitled to two or more votes need
not cast all his votes for or against in the same way.

The voting at a shareholders’ general meeting shall be taken by way of registered poll.

Requirements for Annual General Meetings

Shareholders’ general meetings are divided into annual general meetings and extraordinary
general meetings. Shareholders’ general meetings shall be convened by the board of directors. Annual
general meetings shall be held once every year within six (6) months after the end of each financial
year.

Notice of Meetings and Business to be Conducted Thereat

The shareholders’ general meeting is the organ of authority of the Company and shall exercise
the following functions and powers in accordance with law:

(I) to decide on the Company’s business policies and investment plans;

(II) to elect and replace directors and to decide on matters relating to the remuneration of
directors;

(III) to elect and replace those supervisors who are not employee representatives, and to decide
on matters relating to the remuneration of supervisors;

(IV) to consider and approve reports of the board of directors;

(V) to consider and approve reports of the supervisory committee;

(VI) to consider and approve the Company’s annual financial budget and final accounts;

(VII) to consider and approve the Company’s profit distribution proposal and proposal for
making up losses;

(VIII) to pass resolutions on the increase or reduction of the Company’s registered capital;

(IX) to pass resolutions on the issuance of bonds by the Company;

(X) to pass resolutions on the appointment, removal or non-renewal of the services of


accounting firms for the Company;

(XI) to pass resolutions on matters such as merger, division, dissolution, liquidation or change
of the form of the Company;

(XII) to pass resolutions on amendments to the Articles of Association;

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(XIII) to consider any motion proposed by shareholders representing 3% or more of the shares of
the Company carrying the right to vote;

(XIV) to consider the share incentive plan;

(XV) to consider the Company’s acquisition or disposal of material assets with a value exceeding
30% of the latest audited total assets of the Company within one year;

(XVI) to consider the provision of a single external guarantee with a value exceeding 10% of the
latest audited net assets of the Company; and

(XVII) to consider other matters required to be determined by the shareholders’ general meeting
under the laws, administrative regulations, departmental rules or the Articles of
Association.

The aforesaid matters within the competence of the shareholders’ general meeting shall be
considered and determined by the shareholders’ general meeting, but in necessary, reasonable and
legal cases, the shareholders’ general meeting may authorize the board of directors to make such
determination. Such authorization shall be clear and specific. The shareholders’ general meeting shall
not delegate any of its statutory functions and powers to the board of directors or any other institutions
or individuals.

For the authorization to the board of directors by the shareholders’ general meeting, if the
authorization relates to matters required by the Articles of Association to be passed by ordinary
resolutions at general meeting, it shall be passed by the shareholders (including proxy of shareholders)
representing more than half of the voting rights present in the shareholders’ general meeting; if the
authorization relates to matters required by the Articles of Association to be passed by special
resolutions of general meeting, it shall be passed by shareholders (including proxy of shareholders)
representing two thirds or more of the voting rights present in the shareholders’ general meeting.

An extraordinary shareholders’ general meeting shall be convened within two (2) months from
the occurrence of any of the following events:

• the number of directors is lower than that specified in the Company Law or less than two
thirds of the total number of directors specified in the Articles of Association;

• the Company’s uncovered losses amount to one third of the Company’s total share capital;

• shareholder(s) holding 10% or more of the Company’s issued shares carrying voting rights
request(s) in writing the convening of an extraordinary general meeting;

• the board of directors considers it necessary;

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

• the supervisory committee proposes that such a meeting shall be convened;

• when resolutions of the board of directors may impair the interests of the Company or the
insured, the board of directors does not accept the advice of independent directors and such
a meeting is requested by no less than half of and at least two independent directors to the
board of directors; or

• other circumstances as provided by laws, administrative regulations, departmental rules or


the Articles of Association.

An extraordinary general meeting or class shareholders’ meeting required by shareholders shall


be convened in accordance with the following procedures:

(I) two or more shareholders who jointly hold 10% or more of the shares carrying voting rights
at the proposed meeting may request the board of directors to convene an extraordinary
general meeting or class shareholders’ meeting by signing a written requisition or several
copies with the same format and content, and to illustrate the subject of the meetings. The
board of directors shall convene an extraordinary general meeting or class shareholders’
meeting as soon as possible upon receipt of the foresaid written requisition. The aforesaid
number of shareholdings is calculated as at the date of the submission of the written
requisition by the shareholders.

(II) if the board of directors fails to issue a notice of convening such a meeting within thirty
(30) days from the date of receipt of the aforesaid written requisition, the shareholders who
raise the requisition may themselves convene the meeting within four (4) months from the
date of receipt of the requisition by the board of directors. The procedures of convening the
meeting shall be the similar as those of convening a shareholders’ general meeting by the
board of directors as far as possible.

If the shareholders call and convene a meeting by themselves since the board of directors cannot
convene the meeting in accordance with the foresaid requisition, the expenses reasonably resulted
therefrom shall be borne by the Company and deducted from the amounts owed to the directors who
have neglected their duties.

When the Company convenes a shareholders’ general meeting, a written notice of the meeting
shall be given forty-five (45) days before the date of the meeting (excluding the date of the meeting)
to notify all the shareholders in the register of members of the matters to be considered at, and the
date and place for, the meeting. A shareholder who intends to attend the meeting shall deliver a written
reply concerning the attendance of the meeting to the Company twenty (20) days before the date of
the meeting.

The Company shall, based on the written replies received twenty (20) days before the date of the
shareholders’ general meeting, calculate the number of voting shares represented by the shareholders
who intend to attend the meeting. If the number of voting shares represented by the shareholders who

— V-16 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

intend to attend the meeting reaches more than half (1/2) of the Company’s total voting shares, the
Company may convene the shareholders’ general meeting; if not, the Company shall, within five (5)
days, notify the shareholders again by announcement of the matters to be considered at, and the date
and place for, the meeting. The Company may then convene the meeting after such announcement is
made.

An extraordinary general meeting shall not decide on those matters not stated in the notice of a
meeting.

The notice of a shareholders’ general meeting shall comply with the following requirements:

• to be served in writing;

• to specify the date, place and duration of the meeting;

• to provide shareholders with the detailed information and explanations necessary for the
shareholders to make sound decisions about the matters to be discussed. This principle
includes (but is not limited to) the provision of the specific terms and contract(s), if any,
of the proposed transaction(s) and serious explanations about the causes and effects when
the Company proposes mergers, repurchase of shares, restructuring of share capital or other
restructuring;

• where any matters relating to previous resolutions of shareholders’ general meeting need to
be changed, the proposal shall be complete in contents and shall not merely list the
proposed changes;

• in the event that any of the directors, supervisors and senior management has material
interests at stake in matters to be discussed, the nature and extent of the interests at stake
shall be disclosed. If the matters to be discussed affect any director, supervisor and senior
management as a shareholder in a manner different from how they affect the same type of
other shareholders, the difference shall be explained;

• to include the full text of any special resolution to be proposed for approval at the meeting;

• to contain a conspicuous statement that “a shareholder who is entitled to attend and vote
at the meeting may appoint one or more proxies to attend and vote at the meeting on his/her
behalf and such proxy needs not to be a shareholder of the Company”;

• to specify the date and place for the delivery of proxy forms for voting;

• to state the names and telephone numbers of the standing contact persons for the meeting.

— V-17 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

The notice of a shareholders’ general meeting shall be served to shareholders (regardless of


whether they are entitled to vote at the shareholders’ general meeting) either by hand or by post in a
prepaid mail, addressed to such shareholders at their registered addresses as shown in the register of
shareholders. For holders of unlisted shares, the notice of a shareholders’ general meeting may also
be given by publishing an announcement.

The announcement referred to in the preceding paragraph shall be published in one or more
newspapers designated by the securities regulatory authority under the State Council within a period
of forty-five (45) to fifty (50) days before convening the meeting. Once the announcement is
published, all holders of unlisted shares shall be deemed to have received the notice in relation to the
shareholders’ general meeting.

For holders of overseas listed shares, subject to the laws, regulations, normative documents and
the relevant requirements of the securities regulatory authorities of the place where the shares of the
Company are listed, the notice of a shareholders’ general meeting may be published on the websites
of the Company and Hong Kong Stock Exchange instead of delivery by hand or prepaid mail. Once
the announcement is published, all holders of overseas listed shares shall be deemed to have received
the notice in relation to the shareholders’ general meeting.

The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting
by, any person entitled to receive such notice, shall not invalidate the meeting and the resolutions
passed at the meeting.

The following matters shall be passed by way of an ordinary resolution at a shareholders’ general
meeting:

(I) the business objectives, development strategies and investment plans of the Company;

(II) appointment and removal of members of the board of directors and members of the
supervisory committee, their remuneration and method of payment thereof;

(III) work reports of the board of directors and the supervisory committee;

(IV) proposed annual preliminary financial budgets, final account proposals, balance sheets,
statement of income and other financial statements of the Company;

(V) the profit distribution plan and loss recovery plan formulated by the board of directors;

(VI) matters related to material external investment, acquisition of assets, disposal of assets,
merger and acquisition, mortgage on assets and external donation, etc.;

(VII) engagement or change of an accounting firm as the auditor of the Company;

— V-18 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(VIII) provision of guarantee to any shareholder or actual controller;

(IX) matters other than those requiring approval by way of special resolution in accordance with
the laws, administrative regulations or the Articles of Association.

The following matters shall be passed by way of a special resolution at a shareholders’ general
meeting:

(I) an increase or reduction of the Company’s share capital and the issuance of any class of
shares, warrants and other similar securities;

(II) the issuance of corporate bonds;

(III) the merger, division, dissolution, liquidation or change of corporate form of the Company;

(IV) amendments to the Articles of Association;

(V) the Company’s purchase or disposal of material assets or the provision of guarantees within
one year, which are more than 30% of the total assets of the Company;

(VI) removal of independent directors;

(VII) employee stock ownership scheme;

(VIII) other matters considered by a shareholders’ general meeting, by way of an ordinary


resolution, to be of a nature which may have a material impact on the Company and require
adoption by way of a special resolution.

Shares held by the Company do not carry voting rights, and shall not be counted in the total
number of voting shares represented by shareholders present at a shareholders’ general meeting.

Pursuant to applicable laws, regulations and listing rules of the location where the Company’s
shares are listed, if any shareholder must abstain from voting on any resolution or is restricted to
declaring only affirmative vote or only dissenting vote on any resolution, any vote declared by the said
shareholder or proxy thereof against the relevant provision or restriction shall not be counted in the
voting result.

The chairman of the meeting shall determine whether the resolution proposed at the general
meeting is passed or not according to the voting results, and his decision shall be final and conclusive
and shall announce the voting results at the meeting. The voting result of resolutions shall be recorded
in the meeting minutes. If the chairman of the meeting has any doubts about the voting result of a
resolution, he may arrange the recounting of the votes. If the chairman of the meeting does not arrange
the re-counting of the votes, a shareholder or proxy attending the meeting who dissents from the result
announced by the chairman of the meeting shall be entitled to request the re-counting of votes
immediately after the announcement of the voting result, in which case the chairman of the meeting
shall immediately arrange the re-counting of the votes.

— V-19 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Accounting and Auditing

The Company shall formulate its financial and accounting system in accordance with the laws,
administrative regulations and the PRC accounting standards formulated by the State finance
authorities.

The Company shall prepare its annual financial report within one hundred and twenty (120) days
after the end of each fiscal year, which shall be audited by an accounting firm according to the law.

The board of directors of the Company shall at each annual general meeting submit to
shareholders the financial reports prepared by the Company as required by relevant laws,
administrative regulations and normative documents issued by local governments and authorities.

The financial reports of the Company shall be made available at the Company for review by
shareholders twenty (20) days before the date of annual general meeting. Each shareholder of the
Company shall be entitled to obtain a copy of the financial reports referred to in this chapter.

The Company shall, at least twenty-one (21) days before the date of every annual general
meeting, deliver by hand or by prepaid post the aforesaid financial reports and the reports of the board
of directors to each holder of the overseas listed foreign shares of the Company at the addresses
specified in the register of members.

In addition to financial statements prepared in accordance with PRC accounting standards and
regulations, the Company may also prepare its financial statements according to the international
accounting standards or overseas accounting standards in the place where the shares of the Company
are listed. Material differences between the financial statements prepared according to different
accounting standards shall be explicitly explained in the notes to the financial statements. When
distributing the after-tax profits for the fiscal year, the Company shall base its distribution on the
lower of the after-tax profits in the aforesaid two financial statements.

Any interim results or financial information published or disclosed by the Company shall be
prepared in accordance with PRC accounting standards and regulations and may also be prepared in
accordance with either international accounting standards or accounting standards of the foreign stock
exchange where the shares of the Company are listed.

The Company shall publish its financial reports twice in each fiscal year, i.e. the interim
financial report within sixty (60) days after the end of the first six (6) months of a fiscal year and the
annual financial report within one hundred and twenty (120) days after the end of a fiscal year.

The Company shall not keep any accounting book other than the statutory accounting books. The
assets of the Company shall not be kept under any account set up in the name of any individual.

— V-20 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Upon its establishment, the Company is required to make a security deposit which amount to
20% of its registered capital into a bank designated by the CIRC. Such security deposit shall not be
used for any purposes other than settling the debts of the Company during liquidation proceedings.

The after-tax profits of the Company shall be distributed in the following order of priority:

(I) cover the losses in prior years;

(II) set aside 10% of them to its statutory reserve fund;

(III) set aside to its discretionary reserve fund;

(IV) pay dividends to shareholders.

The reserves funds of the Company shall be used to cover its losses, expand the operation, or
shall be converted into the capital of the Company. However, the capital reserves fund shall not be
used to cover the losses of the Company.

When converting any statutory reserves fund into share capital, the remaining statutory reserves
fund shall be no less than 25% of its registered capital prior to such conversion.

Transfer of Shares

The shares of the Company that are already in issue prior to its public offering are not
transferable within one year commencing from the date on which the shares of the Company are listed
and traded on a stock exchange.

Each of the directors, supervisors and members of senior management of the Company shall
regularly report to the Company the number of shares held by him in the Company and the subsequent
changes in their shareholdings during his period of office. The number of shares which he may transfer
every year during his period of office shall not exceed 25% of the total number of the Company’s
shares held by him; and the shares of the Company held by him are not transferable within one year
commencing from the date on which the shares of the Company are listed and traded. Such personnel
shall not transfer the Company’s shares in their possession within six months after they have
terminated their employment with the Company.

If there are other provisions with respect to restraints on transfer of shares listed overseas as
prescribed in the relevant regulations of the securities regulatory authorities of the place where the
shares of the Company are listed, those provisions shall be followed.

When shareholders transfer the shares of the Company, this fact must be reported to the Company
in writing on the day of its occurrence.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Power of the Company to Purchase Its Own Shares

The Company may, in accordance with the procedures set out in the Articles of Association and
subject to the approval from the relevant governing authority of the state, repurchase its shares under
the following circumstances:

(I) cancellation of shares for the purpose of reducing its capital;

(II) merger with other companies that hold shares in the Company;

(III) awarding shares to the Company’s employees;

(IV) acquisition of shares made upon the request of its shareholders who disagree with
resolutions passed at a shareholders’ general meeting in connection with a merger or
division of the Company;

(V) other circumstances permitted by laws and administrative regulations.

Except for the circumstances specified above, the Company shall not acquire its own shares.

The Company’s acquisition of its own shares pursuant to items (I) to (III) above shall be subject
to resolution of the shareholders’ general meeting.

The shares of the Company acquired in accordance with item (I) above shall be cancelled within
ten (10) days from the date of acquisition; those acquired in accordance with items (I) and (IV) shall
be transferred or cancelled within six (6) months.

Shares acquired in accordance with item (III) above shall not exceed 5% of the total number of
the Company’s issued shares. Such acquisition shall be financed by funds appropriated from the
Company’s profit after taxation, and the shares so acquired shall be transferred to employees within
one year.

The Company may, with the approval of the relevant competent authority of the state, repurchase
its shares in one of the following ways:

(I) making a pro rata offer of repurchase to all of its shareholders;

(II) repurchasing through public dealing on a stock exchange;

(III) repurchasing by an agreement outside a stock exchange;

(IV) other circumstances permitted by the state laws, administrative regulations and regulatory
provisions or by the securities regulatory authorities and the stock exchange of the place
where the shares of the Company are listed.

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APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Where the Company repurchases its shares by an off-market agreement, the prior sanction of
shareholders’ general meeting shall be obtained in accordance with the Articles of Association. The
Company may release, vary or waive its rights under a contract so entered into by the Company with
the prior approval of shareholders’ general meeting obtained in the same manner.

A contract to repurchase shares as referred to above includes (without limitation) an agreement


to become obliged to repurchase or an acquisition of the right to repurchase shares.

The Company shall not assign the contracts to repurchase shares or its rights under such
contracts.

For redeemable shares which the Company is entitled to repurchase, the consideration for
repurchase shall be limited to a maximum price if not being repurchased through a stock exchange or
repurchased through a tender. In case of the latter, it shall be opened to all shareholders under the same
conditions.

Unless the Company is in the course of liquidation, it must comply with the following provisions
in relation to repurchase of its outstanding shares:

(I) where the Company repurchases its shares at par value, payment shall be made out of book
surplus distributable profits of the Company or out of proceeds of issue of new shares made
for that purpose;

(II) where the Company repurchases its shares at a premium to its par value, payment up to the
par value shall be made out of the book surplus distributable profits of the Company or out
of the proceeds of issue of new shares made for that purpose. Payment of the portion in
excess of the par value shall be effected as follows:

1. if the shares being repurchased were issued at par value, payment shall be made out
of the book surplus distributable profits of the Company;

2. if the shares being repurchased were issued at a premium to its par value, payment
shall be made out of the book surplus distributable profits of the Company or out of
the proceeds of issue of new shares made for that purpose, provided that the amount
paid out of the proceeds of the new issue shall not exceed the aggregate of premiums
received by the Company on the issue of the shares repurchased nor the amount of the
Company’s share premium account (or the Company’s capital reserve fund account)
(including the premiums on the fresh issue);

(III) payment by the Company in consideration of the following shall be made out of the
Company’s distributable profits:

1. acquisition of rights to repurchase its shares;

— V-23 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

2. variation of any contract to repurchase its shares;

3. release of any of its obligations under any contract to repurchase shares.

(IV) after the Company’s registered share capital has been reduced by the total par value of the
cancelled shares in accordance with the relevant provisions, the amount deducted from the
distributable profits for payment of the par value portion of the shares repurchased shall be
transferred to the Company’s share premium account (or the capital reserve fund account).

Power of Any Subsidiary of the Company to Own Shares in the Company

There are no provisions in the Articles of Association preventing ownership of shares in the
Company by a subsidiary.

Dividends and Distribution Methods

Following a resolution approving the profit distribution plan at a shareholders’ general meeting,
the board of directors shall complete the distribution of the dividends within two (2) months from the
convening of such meeting.

The Company may distribute dividends in cash or by shares. Any amount paid up in advance of
calls on any share may carry interest but shall not entitle the holder of the shares to participate in
respect thereof in a dividend subsequently declared. Where the Company is granted the power to seize
any dividends not claimed by anybody, this power may not be exercised until at least six (6) years
following the date that the dividends are announced.

The Company shall appoint receiving agents on behalf of the holders of overseas listed shares
to receive on behalf of such shareholders dividends declared and all other monies owed by the
Company in respect of their overseas listed shares. Such proceeds shall be managed by the receiving
agents on such shareholders’ behalf to be paid to them.

The receiving agent appointed by the Company shall comply with the laws and relevant
requirements of the stock exchange of the place where the shares of the Company are listed.

The receiving agents appointed on behalf of holders of overseas listed shares which are listed in
Hong Kong shall be a company registered as a trust company under the Trustee Ordinance of Hong
Kong.

Provided that the relevant laws and regulations in the PRC are observed, the Company may
exercise the right to forfeit unclaimed dividends, but the said right shall be exercised only after the
expiry of the applicable validity period of the announced dividends.

— V-24 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

The Company shall be entitled to deliver the dividend warrant directly or by mail via the
receiving agent. If such dividend warrants have not been cashed for two consecutive times, the
Company shall be entitled to terminate the delivery of dividend warrants by mail to relevant
shareholders. However, if such dividend warrant failed to reach the recipient and thus was returned
for the first time, the Company may also exercise the said right.

The Company shall have the right to sell the shares of holders of overseas listed shares not
contactable by means regarded as appropriate by the board of directors, but the following conditions
must be met:

(I) that dividends on such shares have been delivered at least three (3) times within twelve (12)
years and no claim has been made during such period;

(II) that the Company publishes an announcement on one or more newspapers of the place
where shares of the Company are listed after the expiry of the 12-year period, stating its
intention to sell such shares, and informs the stock exchange of the place where such shares
are listed.

Proxies

Any shareholder entitled to attend and vote at a shareholders’ general meeting shall be entitled
to attend the meeting in person or appoint one or more persons (no matter whether a shareholder or
not) as his/her proxy to attend and vote on his/her behalf, and the proxy may exercise the following
rights in accordance with the shareholder’s appointment:

(I) the shareholder’s right to speak at the meeting;

(II) the right to individually or jointly with others request for voting by poll;

(III) the right to vote, but when more than one proxy has been appointed, the proxies can only
vote on a poll.

If the shareholder is the recognized clearing house (or its nominees), such shareholder may
appoint one or more person as it thinks fit to act as his/her/its proxy in any general meeting or any
meeting of the shareholders of a class. If more than one person is appointed, the proxy form shall
specify the number and class of shares involved for each person. Each person so appointed may
exercise the rights on behalf of recognized clearing house (or its nominees), as if such person is an
individual shareholder of the Company.

The proxy form shall be deposited at the domicile of the Company or at other place as specified
in the meeting notice, at least 24 hours before the relevant meeting or 24 hours before the designated
voting time. If the proxy form is signed by a person authorized by the appointer, a notary certified
copy of the power of attorney or other authorization documents is needed, which shall be deposited
together with the proxy form at the domicile of the Company or at other place as specified in the
meeting notice.

— V-25 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

If the appointer is a legal person, a person that is authorized by the legal representative, or by
the resolution of the board of directors or other governing body, shall act as the shareholder’s
representative to attend any general meeting of the Company.

The shareholder shall appoint a proxy in writing. The proxy form shall be signed by the appointer
or his/her attorney duly authorized in writing; if the appointer is a legal person, the appointment
document shall be affixed with the legal person’s seal or be signed by a director or attorney duly
authorized. For legal representatives who attend the meeting, his/her own identity card, valid evidence
of his/her legal representative qualification and shareholding evidence shall be provided. For proxies
who attend the meeting, the proxy shall provide his/her own identity card and the power of attorney
from the shareholders issued in accordance with the law.

The proxy form issued by a shareholder to appoint a proxy to attend the meeting shall set out the
following:

(I) the name of the proxy;

(II) whether or not the proxy has the right to vote;

(III) the respective instructions on voting for, voting against or abstention from voting in respect
of each agenda item of the shareholders’ general meeting;

(IV) the date of issue and validity term of the proxy form; and

(V) the number of shares of the appointer represented by the proxy.

A vote given in accordance with the form of proxy shall be valid notwithstanding the previous
death or loss of capacity of the appointer or revocation of the proxy or of the authority under which
the proxy was executed, or the transfer of the shares in respect of which the proxy is given, provided
that no notice in writing of such death, insanity, revocation or transfer as aforesaid has been received
by the Company before the commencement of the meeting at which the proxy is used.

Calls on Shares and Forfeiture of Shares

Any amount paid up in advance of calls on any share may carry interest but shall not entitle the
holder of the share to participate in respect thereof in a dividend subsequently declared.

Subject to the relevant laws and regulations, the Company can seize any dividends not claimed
by anybody, but this power may not be exercised until at least six (6) years following the date upon
which the dividends are announced.

— V-26 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Rights of Shareholders

The ordinary shareholders of the Company shall enjoy the following rights:

(I) to receive dividends and other distributions in proportion to the number of shares held;

(II) to request, convene, chair, attend and vote in person or appoint a proxy to attend and vote
on his behalf at a shareholders’ general meeting in proportion to the number of shares held
in accordance with the laws;

(III) to oversee the Company’s business operations and to present proposals or to raise enquiries;

(IV) to transfer, give or pledge the shares he holds in accordance with laws, administrative
regulations and provisions of the Articles of Association;

(V) to obtain the related information in accordance with laws, regulations and regulatory
provisions and provisions of the Articles of Association, including:

1. to obtain a copy of the Articles of Association, subject to payment of cost;

2. to inspect and copy, subject to payment of a reasonable charge:

(1) all parts of the share register;

(2) personal particulars of each of the Company’s directors, supervisors, general


manager and other members of senior management as follows:

(a) present name and alias and any former name and alias;

(b) principal address (residence);

(c) nationality;

(d) primary and all other part-time occupations and duties;

(e) identification document and its number.

(3) reports on the status of the Company’s share capital;

(4) reports showing the aggregate par value, quantity, maximum and minimum
prices paid in respect of each class of shares repurchased by the Company since
the end of the last financial year and the aggregate amount incurred by the
Company for this purpose;

— V-27 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(5) minutes of shareholders’ general meetings, minutes of board meetings and


minutes and resolutions of supervisory committee meetings;

(6) financial reports;

(7) the reports of directors, supervisors and auditors;

(8) a copy of the latest annual inspection form that has been filed with the
administration for industry and commerce or other competent authorities;

(9) documents mentioned in items (1) to (8) excluding item (2) above and other
applicable documents shall be made available by the Company at the Company’s
place of business in Hong Kong in accordance with the Hong Kong Listing
Rules, for inspection by the public and holders of overseas listed shares with no
charge;

(10) the Company may refuse any request of inspection or duplication if trade secrets
and inside information of the Company or the personal privacy of persons
concerned are involved.

(VI) in the event of the termination or liquidation of the Company, to participate in the
distribution of remaining assets of the Company in accordance with the number of shares
held;

(VII) to know and participate in the Company’s significant events as specified in laws,
regulations, regulatory provisions and the Articles of Association;

(VIII) to request the recording and change of the register of members;

(IX) other rights as specified by laws, administrative regulations, departmental rules or the
Articles of Association.

If any person holding direct or indirect interest in shares exercises his rights on the shares of the
Company without revealing such interest to the Company, the Company shall not compromise such
person’s rights on the shares of the Company by freezing such rights or otherwise.

Rights of the Minorities in Relation to Fraud or Oppression

In addition to obligations imposed by laws, administrative regulations or required by the stock


exchange of the place where the shares of the Company are listed, a controlling shareholder shall not
exercise his/her voting rights in respect of the following matters in a manner prejudicial to the
interests of the shareholders generally or of some part of the shareholders of the Company:

(I) to relieve a director or supervisor of his/her duty to act honestly in the best interests of the
Company;

— V-28 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(II) to approve the expropriation by a director or supervisor (for his/her own benefit or for the
benefit of another person), in any guise, of the Company’s property, including (but not
limited to) opportunities beneficial to the Company;

(III) to approve the expropriation by a director or supervisor (for his/her own benefit or for the
benefit of another person) of the individual rights or interests of other shareholders,
including (but not limited to) rights to distributions and voting rights save pursuant to a
restructuring submitted to the shareholders’ general meeting for approval in accordance
with the Articles of Association.

Procedures on Liquidation

The Company is an insurance corporation engaged in property and casualty insurance business.
The Company shall not be dissolved except in the following circumstances:

(I) expiry of the term of its operation;

(II) dissolution as resolved by a shareholders’ general meeting;

(III) dissolution as a result of merger or division with the approval of the China Insurance
Regulatory Commission;

(IV) declaration of bankruptcy in accordance with law due to its failure to repay debts due;
declaration of bankruptcy by the people’s court with the approval of the China Insurance
Regulatory Commission;

(V) its insurance business license is revoked by the China Insurance Regulatory Commission or
it is ordered to close down its business in accordance with law for violating the relevant
laws and regulations.

Where the Company is dissolved in accordance with item (I) or (II) above, a liquidation
committee shall be formed within 15 days. The members of the liquidation committee shall be
determined by way of ordinary resolution at shareholders’ general meeting.

Where the Company is dissolved in accordance with item (4) above, the people’s court can set
up a liquidation committee consisting of relevant institutions (such as the China Insurance Regulatory
Commission) and relevant persons to carry out the liquidation.

Where the Company is dissolved in accordance with item (5) above, it shall be closed according
to the law and the China Insurance Regulatory Commission can set up a liquidation committee to carry
out the liquidation according to the law.

— V-29 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Where the board of directors decides to liquidate the Company (due to causes other than where
the Company has declared bankruptcy), the board of directors shall, in its notice convening a
shareholders’ general meeting, declare that, after making full inquiry into the affairs of the Company,
the board of directors is of the opinion that the Company will be able to repay its debts within twelve
(12) months after the commencement of the liquidation.

Upon passing of the resolution at the shareholders’ general meeting for the liquidation of the
Company, all functions and powers of the board of directors shall cease forthwith.

The liquidation committee shall act in accordance with the instructions of the shareholders’
general meeting and report at least once a year to the shareholders’ general meeting on the committee’s
receipts and payments, the business of the Company and the progress of the liquidation and shall
present a final report before the shareholders’ general meeting on completion of the liquidation.

The liquidation committee shall give notices to the creditors within ten (10) days after its
establishment and issue announcements for at least three (3) times in the newspaper as designated by
the China Insurance Regulatory Commission within sixty (60) days after its establishment. What is
announced shall be approved by the China Insurance Regulatory Commission. The creditors shall
report claims to the liquidation committee within thirty (30) days after the date of the receipt of such
notices or within forty-five (45) days after the date of the announcement if no notice is received.

When reporting claims, a creditor shall explain the relevant particulars of the claims and provide
supporting materials. The liquidation committee shall register the claims.

In the period of reporting claims, the liquidation committee shall not make any debt repayment
to the creditors.

After the liquidation committee has sorted out the property of the Company and prepared a
balance sheet and an inventory of assets, it shall formulate a liquidation scheme and report it to the
shareholders’ general meeting or the people’s court for confirmation.

The remaining property of the Company shall be distributed to the shareholders according to the
class and proportion of shares held by each of the shareholder after payments have been made towards
the liquidation fees, salaries and social security expenses of employees, compensation or insurance
benefits, taxes and debts of the Company.

During the liquidation, the Company remains in existence but shall not carry out any operating
activity which does not relate to the liquidation. The property of the Company shall not be distributed
to the shareholders before the debts are settled pursuant to the preceding paragraph.

After the liquidation committee has sorted out the property of the Company and prepared a
balance sheet and an inventory of assets, in the event that the property of the Company is insufficient
to repay the debts, the liquidation committee shall apply to the people’s court for declaration of
bankruptcy.

— V-30 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

After the people’s court declares bankruptcy of the Company, the liquidation committee shall
hand over the liquidation matters to the people’s court.

After the completion of liquidation, the liquidation committee shall prepare a liquidation report
and a statement of receipts and payments and the financial accounts for the liquidation period, which
shall be examined and verified by the PRC certified public accountants and submitted to the
shareholders’ general meeting or relevant competent authority for confirmation.

The liquidation committee shall, within 30 days after the confirmation of the shareholders’
general meeting or competent authority, submit the aforesaid documents to the Company’s registration
authority, apply to deregister the Company and publish an announcement on the dissolution of the
Company.

Other Provisions Material to the Company and Its Shareholders

General Provisions

The Company is a joint stock limited company in perpetual existence.

The Articles of Association shall take effect after being considered and passed at the
shareholders’ general meeting, upon approval of the China Insurance Regulatory Commission and the
listing of H shares publicly issued by the Company on the Stock Exchange of Hong Kong Limited (the
“Hong Kong Stock Exchange”). After the Articles of Association come into effect, the original articles
of association shall be superseded by the Articles of Association. After the Articles of Association
becomes effective, it shall act as a legally binding document for standardizing the Company’s
structure and behaviors, and the rights and obligations between the Company and its shareholders and
also among the shareholders. The Articles of Association will be binding upon the Company, its
shareholders, directors, supervisors, general manager and other members of senior management. The
aforesaid personnel shall all have the right to propose claims concerning the affairs of the Company
in accordance with the Articles of Association.

Pursuant to the Articles of Association, shareholders may prosecute the Company; the Company
may prosecute its shareholders; a shareholder may prosecute other shareholders. Shareholders may
prosecute the directors, supervisors, general manager and other members of senior management of the
Company pursuant to the Company Law, other relevant provisions and the Articles of Association.

The Company may, based on its operating and development needs and in accordance with laws,
regulations, normative documents as well as the Articles of Association, increase its registered capital
in the following ways, subject to resolution by the shareholders’ general meeting and approval from
the China Insurance Regulatory Commission and other relevant regulatory authorities:

(I) public offer of shares;

— V-31 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(II) non-public offer of shares;

(III) placing shares to existing shareholders;

(IV) bonus issue to existing shareholders;

(V) converting capital reserve into share capital;

(VI) other means permitted by laws, administrative regulations and the relevant regulatory
authorities.

The Company’s increase of capital by issuing new shares shall, after being approved pursuant to
the Articles of Association, be conducted in accordance with the procedures stipulated by relevant
laws and administrative regulations of the state.

Unless otherwise provided by laws, administrative regulations or the securities regulatory


authorities and the stock exchange of the place where the shares of the Company are listed, the shares
of the Company can be freely transferred and pledged according to laws and are not subject to any lien.

Pursuant to the laws, regulations, normative documents as well as the Articles of Association,
upon the resolution of the shareholders’ general meeting and the approval from the China Insurance
Regulatory Commission and other relevant regulatory authorities, the Company may reduce its
registered capital, which shall be conducted in accordance with the procedures stipulated by the
Company Law, the Insurance Law and other relevant regulations as well as the Articles of Association.

The Company shall prepare a balance sheet and a list of assets before the shareholders’ general
meeting votes thereon.

The Company shall notify its creditors within ten (10) days after the date of resolution on
reducing the registered capital and announce it on a newspaper at least three times within thirty (30)
days. Creditors have the right to request the Company to repay its debts or to provide a relevant debt
settling guarantee within thirty (30) days after receiving the notice or within forty-five (45) days after
the date of the first announcement if no such notice has been received.

The Company’s registered capital after reduction shall not be less than the statutory minimum
amount.

Board of Directors

The board of directors is accountable to the shareholders’ general meetings and exercises the
following powers:

(I) to convene the shareholders’ general meetings and to report on its work to the shareholders’
general meetings;

— V-32 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(II) to implement the resolutions of the shareholders’ general meetings;

(III) to decide on the Company’s business plans and investment plans, to control and monitor the
financial conditions and use of funds of the Company;

(IV) to formulate the Company’s development strategies;

(V) to formulate the Company’s annual financial budget and final accounts plan;

(VI) to formulate the Company’s profit distribution plan and loss recovery plan;

(VII) to formulate proposals for the increase or decrease of the Company’s registered capital and
the issuance of corporate debentures or other securities of the Company and listing plans;

(VIII) to evaluate and improve the corporate governance of the Company;

(IX) to formulate the plans for major acquisitions, acquisition of shares of the Company, or
merger, division, dissolution and change of form of the Company;

(X) to decide on the establishment of the internal management structure of the Company;

(XI) to formulate the basic management system of the Company;

(XII) to periodically evaluate and improve corporate governance and to review the corporate
governance report of the Company;

(XIII) to decide to appoint or dismiss the general manager of the Company and his/her
compensation, and in accordance with the nominations of the general manager, to decide to
appoint or dismiss the deputy general manager, financial controller, compliance officer and
other senior management of the Company and their compensation;

(XIV) to assess and monitor the training and continuing professional development of directors and
senior management;

(XV) to hear the work report of the general manager of the Company and examine his/her work;

(XVI) to establish board committees, including but not limited to the investment strategy
committee, nomination and remuneration committee, audit committee and risk management
committee based on the need of the Company or regulatory requirements;

(XVII) to formulate proposals for amendments to the Articles of Association;

(XVIII) to propose to shareholders’ general meeting of the engagement or change of an accounting


firm as the auditor of the Company, and to review reports of the external auditors,
periodically or occasionally;

— V-33 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(XIX) to formulate the equity incentive plan;

(XX) to assess and review the Company’s compliance with the Corporate Governance Code under
the Hong Kong Listing Rules and disclosure in the Corporate Governance Report;

(XXI) to consider the acquisition or disposal of any major assets, the amount of which exceeds
10% of the latest audited total assets of the Company;

(XXII) to consider the guarantees for which the single amount of external guarantees exceeds 10%
of the latest audited total assets;

(XXIII) to consider the major investment and financial matters that the single project transaction
amount exceeds 25% of the latest audited net assets of the Company, and to formulate the
management system for the use of the Company’s funds and investment authority within the
terms of reference;

(XXIV) to consider the major related transactions required by the CIRC, and to formulate the
management system for related transactions within the terms of reference;

(XXV) other functions and powers as conferred by laws, regulations, normative documents or the
Articles of Association and by shareholders’ general meetings.

Other than the board of directors’ resolutions in respect of the formulation of proposals for
amendment to the Articles of Association of the Company specified in Article (VII), (IX) and (XVII)
which must be passed by the affirmative vote of more than two thirds (2/3) of all directors, the board
of directors’ resolutions in respect of all other matters may be passed by the affirmative vote of a
simple majority of all directors.

The board meetings are classified as regular meetings and extraordinary meetings. Regular
meetings are convened at least four times a year, about once per quarter. It is convened by the
chairman and shall be notified to all directors and supervisors in writing fourteen (14) days prior to
the meeting (excluding the date on which the meeting is convened).

In case of any of the following, the chairman shall convene and preside over the extraordinary
board meetings within ten (10) days from receipt of the proposal:

(I) when proposed by shareholders representing more than one tenth of voting rights;

(II) when proposed by more than one third of directors;

(III) when proposed by more than two independent directors;

— V-34 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(IV) when proposed by the supervisory committee;

(V) when the chairman considers necessary;

(VI) other circumstances as stipulated by laws, regulations, normative documents and the
Articles of Association. The notice of the meeting shall be reported to the CIRC both in
writing and by email.

When the board of directors convenes an extraordinary board meeting, it shall deliver the notice
of the meeting to directors in writing (including but not limited to e-mail) five (5) days prior to the
meeting and also notify the supervisors who attend the meeting. When the Company convenes an
extraordinary board meeting, it shall report to the CIRC in the manner prescribed in the preceding
items while issuing meeting notice to directors. If time is urgent, they can report by telephone.

The board meetings shall only be held when more than half of the directors attend the meeting.
Except as provided in the Articles of Association, resolutions made by the board of directors must be
approved by more than half of the directors.

The voting on the resolutions of the board of directors shall comply with the principle of one
person one vote. When the dissenting votes and affirmative votes are equal, the chairman shall have
right to cast one more vote.

Directors or their close associates (as defined under the Hong Kong Listing Rules) who have
material interests or related party relationship in the matter proposed to be discussed, shall not
exercise their voting rights on such proposal when the board of directors consider such matters, or
exercise any voting rights on behalf of other directors, nor can they be counted in the quorum for
attending the meeting. The board meeting shall only be held if more than half of the directors who do
not have any related party relationship are present. Resolutions of the board meeting shall be passed
by more than half of the directors without related party relationship. Where less than three directors
without related party relationship are present at the board meeting, such proposals shall be submitted
to the shareholders’ general meeting for approval.

No meeting shall be convened by way of communication voting in respect of any proposals in


relation to the profit distribution plan, remuneration plan, major investment and assets disposal,
appointment and discharge of senior management, and other proposals regarding the risk management
of the Company.

Supervisory Committee

The Company has established the supervisory committee. The supervisory committee of the
Company consists of three (3) supervisors. The tenure of the supervisors is three years and may be
renewed.

— V-35 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

The supervisory committee shall have one (1) chairman, who shall be elected or removed by the
vote of over two thirds of all supervisors. The chairman of the supervisory committee shall convene
and preside over the meetings. If the chairman of the supervisory committee is unable or unwilling to
perform the duty, a supervisor jointly elected by more than one half of the supervisors shall convene
and preside over the meeting.

The supervisory committee shall comprise shareholder representatives and an appropriate


proportion of employee representatives of the Company, which proportion shall not be lower than one
third. The supervisors who act as shareholder representatives shall be elected and removed by the
shareholders’ general meeting. The employee representatives in the supervisory committee shall be
elected democratically and removed by the employees of the Company.

The supervisory committee shall exercise the following functions and powers:

(I) to review the financial affairs of the Company;

(II) to supervise the work of the directors and senior management, and propose dismissal of
directors and senior management who have violated laws, administrative rules, the Articles
of Association or the resolutions of the shareholders’ general meetings;

(III) if any act of the directors and senior management damages the interests of the Company,
to require the directors and senior management to rectify such act accordingly;

(IV) examine the finance reports, operating reports, profit distribution proposals and other
financial information to be presented by the board of directors to the shareholders’ general
meeting; if in doubt, appoint certified accountants and chartered auditors in the name of the
Company to carry out audit;

(V) to propose the convening of extraordinary general meetings and, in case the board of the
directors does not perform its obligations to convene and preside over the shareholders’
general meetings in accordance with Company Law, to convene and preside over the
shareholders’ general meetings;

(VI) to make proposals to the shareholders’ general meeting;

(VII) to take legal actions against directors and senior management in accordance with the
provisions of Article 152 of the Company Law;

The supervisory committee shall convene meetings at least once every six (6) months. The
chairman of the supervisory committee shall convene the meetings. The supervisors may propose to
convene an extraordinary meeting of the supervisory committee.

The resolutions of the supervisory committee shall be passed by vote of more than two thirds
(2/3) of the members of the supervisory committee.

— V-36 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

General Manager of the Company

The Company shall have one general manager, who shall be appointed and dismissed by the
board of directors. The tenure of the general manager shall be three (3) years, which may be renewed.

The general manager, deputy general manager, general manager assistant, secretary to the board
of directors, financial controller, compliance officer, audit person and other persons who have been
identified by the board of directors and are qualified to meet the requirements of the CIRC are senior
management of the Company. The senior management of the Company shall obtain the qualification
approved by the CIRC before taking office.

The general manager of the Company shall be accountable to the board of directors and exercise
the following powers:

(I) to preside over the production and operation management work of the Company, organize
the implementation of resolutions of the board of directors and report to the board of
directors;

(II) to organize the implementation of the annual business plan and investment plan of the
Company;

(III) to draft plans for the establishment of the internal management department of the Company;

(IV) to draft the Company’s basic management system;

(V) to formulate the specific regulations for the Company;

(VI) to propose the appointment or dismissal of the deputy general manager, financial controller
and other senior management of the Company;

(VII) to decide to appoint or dismiss responsible management personnel other than those required
to be appointed or dismissed by the board of directors;

(VIII) other powers conferred by the Articles of Association and the board of directors.

The general manager shall formulate relevant working rules, which shall be implemented upon
approval by the board of directors.

The general manager may tender his or her resignation before his or her term expires. The
specific procedures and methods for the resignation of the general manager shall be provided in the
employment contract between the general manager and the Company.

The general manager may attend the board meetings but shall not have voting rights if he/she is
not a director.

— V-37 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Chairman

The chairman shall exercise the following powers:

(I) to preside over shareholders’ general meetings and to convene and preside over the board
meetings;

(II) to supervise and examine the implementation of resolutions passed by the board of
directors;

(III) to execute the shares, bonds and other marketable securities issued by the Company;

(IV) to sign important documents of the board of directors and other documents that shall be
signed by the legal representative of the Company;

(V) to exercise the duties and powers of a legal representative;

(VI) other duties and powers required by laws, regulations, normative documents and the
securities regulatory authorities of the place where the shares of the Company are listed and
conferred by the board of directors.

The vice chairman shall assist the chairman in work. In the event that the chairman is incapable
of performing or does not perform his/her duties, the duties shall be performed by the vice chairman.
Where the vice chairman is incapable of performing or does not perform his/her duties, a director
nominated by more than half of the directors shall perform the duties of the chairman.

Secretary to the Board of Directors

The board of directors of the Company shall appoint a secretary to the board of directors. The
secretary to the board of directors is a senior manager of the Company and shall be accountable to the
Company and the board of directors.

The secretary to the board of directors shall be a natural person with the necessary professional
knowledge and experience, and shall be nominated by the chairman of board and appointed or removed
by the board of directors. The secretary to the board of directors shall possess the following
qualifications:

(I) A bachelor’s degree or higher degrees and no less than five (5) years of work experience
appropriate to performing the duties;

(II) Certain knowledge in accounting, tax, law, finance, business management, computer
application and other aspects, with personal integrity and professional ethics, strict
compliance with relevant laws and regulations, and faithful performance of duties;

— V-38 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(III) Provisions with respect to disqualified directors of the Company are applicable to the
secretary to the board of directors; and

(IV) Other conditions as provided by laws, regulations and regulatory documents. Prior to the
holding of office of the secretary to the board of directors, approval of the CIRC on his/her
qualifications shall be obtained.

The principal duties of the secretary to the board of directors are as follows:

(I) To guarantee that the Company has complete organizational documents and records;

(II) To ensure that the Company prepares and submits documents and reports as required by
authorities in accordance with law;

(III) To ensure that the register of shareholders of the Company is properly established and to
ensure that persons entitled to receive such records and documents shall be provided with
the relevant records and documents in time;

(IV) To prepare the shareholders’ general meetings and meetings of the board of directors in
accordance with due procedures and requirement of the chairman of the board of directors;

(V) To prepare and keep the archives of the shareholders’ general meetings and meetings of the
board of directors and materials and documents of other meetings, and to keep the registers
and materials relating to the Company’s shareholders, directors, supervisors and senior
managers;

(VI) To report the notices and resolutions of the shareholders’ general meetings and meetings of
the board of directors to CIRC according to the requirements of regulatory authorities;

(VII) To assist shareholders, directors and supervisors in exercising rights and performing duties;

(VIII) To administer the Company’s affairs including information disclosure and investor
relations;

(IX) To assist the Company’s chairman of the board of directors in drafting the Company’s
corporate governance report;

(X) To report flaws and problems in the Company’s governance structure pursuant to
requirements of the regulatory authorities;

To organize training programs for directors and other relevant personnel pursuant to
requirements of the regulatory authorities.

— V-39 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Except the chairman of the board of directors and managing directors, directors or senior
managers may serve as the secretary to the board of directors concurrently. The certified public
accountants or lawyers employed by the Company shall not act as the secretary to the board of
directors of the Company concurrently. Where the secretary to the board of directors is also a director
and an act is required to be done by a director and a secretary separately, such person who is acting
both as director and the secretary to the board of directors of the Company shall not perform the act
in both capacities.

Untraceable Shareholders

The Company is entitled to sell the Shares of any untraceable shareholder of overseas listed
Foreign Shares in the manner considered to be appropriate by the board of directors in the
circumstances indicated below:

(i) Dividends have been paid at least three times in respect of these Shares within 12 years, but
no one has claimed the dividends during that period; and

(ii) Upon expiration of the 12-year period, the Company publishes an announcement in one or
more newspapers of the region where the Company is listed, indicating its intention to sell
the Shares, and notifies the stock exchange on which these shares are listed of such
intention.

Accounts and Audit

Appointment of Accounting Firm

The Company shall appoint an independent accounting firm (or its joint accounting firm in
China) which is internationally recognized and is qualified under the relevant regulations of China to
audit the annual financial reports and other financial reports of the Company.

The accounting firm appointed by the Company shall hold office for a period commencing from
the conclusion of this annual shareholders’ general meeting until the conclusion of the next annual
shareholders’ general meeting. The appointment may be renewed. The engagement of the Company’s
accounting firm shall be determined at the annual shareholders’ general meeting of each year.

The accounting firm engaged by the Company shall enjoy the following rights:

(I) To have the access to the financial statements, the account book, records or vouchers of the
Company at any time, and have the right to require the directors and senior management of
the Company to provide relevant materials and statements;

(II) To require the Company to take every reasonable measure to obtain the materials and
statements of the subsidiaries necessary for the accounting firm to perform its duties;

— V-40 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(III) To attend the shareholders’ general meeting, obtain the notices of shareholders’ general
meeting that any shareholder is entitled to or other information related to the meeting, and
to address the shareholders’ general meeting in relation to matters concerning its roles as
the Company’s appointed accounting firm.

If there is a vacancy of the office of the accounting firm, the board may fill up the vacancy by
appointing an accounting firm before convening the annual shareholders’ general meeting. But during
the period when the vacancy subsists, if the Company has other accounting firm in office, such firm
can continue to carry out the relevant duty.

The shareholders’ general meeting may dismiss any accounting firm through an ordinary
resolution before the term of such accounting firm expires, regardless of the contract made by the
Company with such accounting firm. If the relevant accounting firm enjoys the right to claim
compensation from the Company because of the disengagement, the relevant rights shall not be
influenced by this provision.

The remuneration of the accounting firm or the method of determining the remuneration shall be
decided by the shareholders’ general meeting. The remuneration of the accounting firm engaged by the
board of directors to fills up the vacancy shall be decided by the board of directors.

The appointment, removal and non-reappointment of an accounting firm shall be resolved by the
shareholders’ general meeting, and shall be filed with the securities regulatory authority of the State
Council. When necessary, the reason for the change shall be stated.

Where it is intended to pass a resolution at a shareholders’ general meeting to appoint an


accounting firm which is not holding a current position to fill any vacancy of the position of the
accounting firm, or to renew the engagement of an accounting firm engaged by the board of directors
to fill up the vacancy, or to dismiss an accounting firm before the expiry of its term of appointment,
such matters shall be handled pursuant to the following provisions:

(I) Before dispatch of the shareholders’ general meeting notice, the proposal on the
appointment or dismissal shall be delivered to the accounting firm to be appointed or to
leave its office or that has already left its office in the relevant fiscal year.

Leaving office shall include the dismissal, resignation and retirement of an accounting firm.

(II) If the accounting firm to leave its office makes any statement in writing and requires
shareholders to be informed of the statement by the Company, unless being too late for the
receipt of such statement, the Company shall take the following measures:

1. Indicating on the notice to the resolution that the leaving accounting firm has made
such a statement;

2. Sending copies of the statement as an annex to the notice to shareholders in such


manner set forth in the Articles of Association.

— V-41 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(III) if the Company fails to deliver such statement made by the relevant accounting firm in
accordance with the provisions in item (II) above, the accounting firm concerned may
require the statement to be read out at the shareholders’ general meeting and make further
complaints.

(IV) the accounting firm to leave office is entitled to attend the following meetings:

1. the shareholders’ general meeting at which its term of office shall expire;

2. the shareholders’ general meeting at which the corresponding vacancy caused by its
dismissal shall be filled;

3. the shareholders’ general meeting convened as a result of its voluntary resignation.

The accounting firm to leave office is entitled to receive all notices or other information related
to the foregoing meetings, and to be heard at the foregoing meetings regarding such matters which
concern it as the former accounting firm of the Company.

30 days’ prior notice shall be given to the accounting firm if the Company decides to remove
such accounting firm or not to renew the appointment thereof. Such accounting firm shall be entitled
to make representations at the general meeting. Where the accounting firm resigns, it shall make clear
to the shareholders’ general meeting whether there has been any impropriety existing in the Company.

An accounting firm may resign by depositing a written resignation notice at the legal address of
the Company. The resignation notice shall become effective on the date of such deposit or on such
later date stipulated in such notice. Such notice shall contain the following statements:

(I) a statement to the effect that there are no circumstances in connection with its resignation
which should be brought to the attention of the shareholders or creditors of the Company;
or

(II) a statement of any such circumstances which should be brought to attention.

The Company shall send a copy of the written notice mentioned above to relevant competent
authorities within 14 days after receipt of the said notice. If the notice contains the statement
mentioned in item (II) above, The Company shall keep a copy of the said statement in the Company
for inspection by the shareholders. Save as otherwise provided in the Articles of Association, the
Company shall also send the aforesaid copy by pre-paid mail to every holder of overseas listed shares
at the address as shown in the shareholders’ register; or the Company shall, during the
above-mentioned period, publish such copy through the website of the stock exchange of the place
where the shares of the Company are listed, or publish such copy in one or more newspapers specified
by the stock exchange website and by the Articles of Association.

— V-42 —
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

Where the accounting firm’s notice of resignation contains a statement of any such circumstances
which should be brought to attention, such accounting firm may require the board of directors to
convene an extraordinary general meeting for the explanation of the circumstances regarding to its
resignation.

Settlement of Disputes

The Company shall comply with the following rules in settling disputes:

(I) Whenever any disputes or claims concerning the affairs of the Company arise from any
rights or obligations as provided in the Articles of Association, the Company Law and other
relevant laws and administrative regulations between a holder of overseas listed shares and
the Company, between a holder of overseas listed shares and a director or supervisor or
senior management of the Company, and between a holder of overseas listed shares and a
holder of unlisted shares, the parties concerned shall resolve such disputes and claims
through arbitration.

Where a dispute or claim described above is submitted for arbitration, the entire dispute or
claim shall be resolved through arbitration; all persons (being the Company or
shareholders, directors, supervisors or other senior management of the Company), who
have a cause of action based on the same facts giving rise to the dispute or claim or whose
participation is necessary for the resolution of such dispute or claim, shall submit to
arbitration.

Disputes over who is a shareholder and over the share register do not have to be resolved
through arbitration.

(II) The party seeking arbitration may elect to have the dispute or claim arbitrated either by the
China International Economic and Trade Arbitration Commission in accordance with its
arbitration rules or by the Hong Kong International Arbitration Centre in accordance with
its securities arbitration rules. Once the party seeking arbitration submits a dispute or claim
to arbitration, the other party must submit to the arbitral institution selected by the party
seeking the arbitration.

If the party seeking arbitration elects to arbitrate the dispute or claim at the Hong Kong
International Arbitration Centre, then either party may apply to have such arbitration
conducted in Shenzhen according to the securities arbitration rules of the Hong Kong
International Arbitration Centre.

(III) If any disputes or claims as mentioned in item (I) are settled by way of arbitration, the laws
of the People’s Republic of China shall apply, except as otherwise provided in the laws and
administrative regulations.

(IV) The award of the arbitral institution is final and shall be binding on the parties thereto.

— V-43 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

I. FURTHER INFORMATION

A. Incorporation

We were incorporated in the PRC as a joint stock limited liability company on October 9, 2013.
We established a principal place of business in Hong Kong at Level 54, Hopewell Centre, 183 Queen’s
Road East, Hong Kong, and were registered as a non-Hong Kong company in Hong Kong under the
Companies (Non-Hong Kong Companies) Regulation (Chapter 622J of the Laws of Hong Kong) on
July 5, 2017. We carry on business in Hong Kong as “ZA Online Fintech P &C” as approved by and
registered with the Registrar of Companies on September 6, 2017 and September 13, 2017,
respectively. Ella Wai Yee Wong and Jin Chen of Level 54, Hopewell Centre, 183 Queen’s Road East,
Hong Kong have been appointed as the Hong Kong authorised representative of the Company for the
acceptance of service of process and any notices required to be served on the Company in Hong Kong.

As we are established in the PRC, we are subject to the relevant laws and regulations of the PRC.
A summary of the relevant aspects of PRC laws and principal regulatory provisions is set out in
Appendix IV to this prospectus. A summary of our Articles of Association is set out in Appendix V.

B. Changes in the registered capital of the Company

The Company was established on October 9, 2013 with a registered capital of


RMB1,000,000,000 divided into 1,000,000,000 Domestic Shares, each with a nominal value of RMB
1, all of which had been fully paid.

On June 7, 2015, our Company increased its registered capital to RMB1,240,625,000.

Immediately following completion of the Global Offering, the registered capital of the Company
will be RMB1,439,918,900, comprising 439,918,900 H Shares and 1,000,000,000 Domestic Shares,
representing approximately 30.5516% and 69.4484%, respectively, assuming the Over-Allotment
Option is not exercised, and RMB1,469,812,900, comprising 469,812,900 H Shares and 1,000,000,000
Domestic Shares, representing approximately 31.9641% and 68.0359%, respectively, assuming the
Over-Allotment Option is exercised.

For further details, see section headed “History and Corporate Structure”.

Save as disclosed in this Appendix, there has been no alteration in our share capital since our
establishment.

C. Resolutions passed by the Shareholders

At the general meeting held on November 14, 2016, among other things, the following
resolutions were passed by the Shareholders:

(a) the issuance of the H Shares by the Company and the Listing, whereby the number of H
Shares to be issued shall not exceed 25% of the total number of Shares after Listing; the
offer price of the H Shares will be decided upon completion of the book building process
for the Listing;

— VI-1 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

(b) subject to the completion of the Global Offering, the Articles of Association be approved
and adopted, which shall become effective on the Listing Date; and

(c) the Board be authorised to handle all matters relating to, among other things, the issue of
the H Shares and the Listing.

2. FURTHER INFORMATION OF OUR SUBSIDIARIES

Our principal subsidiaries are set out under the financial statements in the Accountant’s Report
as included in Appendix I to this prospectus. In addition to those disclosed in the section headed
“History and Corporate Structure” and the Accountant’s Report set forth in Appendix I, the following
alterations in the share capital of our Company’s subsidiaries have taken place in the two years
immediately preceding the date of this prospectus:

ZhongAn (Shenzhen) Life Sciences Co., Ltd (眾安 (深圳) 生命科技有限公司) was incorporated
in the PRC on April 11, 2017 with a registered share capital of RMB50,000,000 and is wholly owned
by our Company through ZhongAn Information and Technology Services Company Limited (眾安信
息技術服務有限公司). Its registered capital increased to RMB500,000,000 on February 27, 2017.

3. FURTHER INFORMATION ABOUT OUR BUSINESS

A. Summary of our material contracts

We have entered into the following contracts (not being contracts entered into in the ordinary
course of our business) within two years immediately preceding the date of this prospectus which are
or may be material:

(a) the Hong Kong Underwriting Agreement; and

(b) a cornerstone investment agreement dated September 12, 2017, entered into between our
Company, Softbank Group Corp., UBS Securities Hong Kong Limited and UBS AG Hong
Kong Branch, as further described in the section headed “Our Cornerstone Investor”.

— VI-2 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

B. Our intellectual property

Trademarks

As at the Latest Practicable Date, we have registered the following trademarks in the PRC and
which we consider to be or may be material to our business:

Place of Registration Expiry date


No. Trademark registration Registered owner Class number (mm/dd/yyyy)

1. PRC Company 35 17274267 08/27/2026

2. PRC Company 36 17274471 08/27/2026

3. PRC Company 38 17274552 08/13/2026

4. PRC Company 36 17458674 09/13/2026

5. PRC Company 35 18081608 11/20/2026

6. PRC Company 35 18079650 11/20/2026

7. PRC Company 35 18079810 11/20/2026

— VI-3 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Registration Expiry date


No. Trademark registration Registered owner Class number (mm/dd/yyyy)

8. PRC Company 35 18079421 11/20/2026

9. PRC Company 36 18080391 11/20/2026

10. PRC Company 36 18080252 11/20/2026

11. PRC Company 36 18080304 11/20/2026

12. PRC Company 36 18080194 11/20/2026

13. PRC Company 38 18081413 11/20/2026

14. PRC Company 38 18081185 11/20/2026

15. PRC Company 38 18080484 11/20/2026

16. PRC Company 38 18081359 11/20/2026

17. PRC Company 35 18015619 11/13/2026

— VI-4 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Registration Expiry date


No. Trademark registration Registered owner Class number (mm/dd/yyyy)

18. PRC Company 36 18015715 11/13/2026

19. PRC Company 38 18015748 11/13/2026

As at the Latest Practicable Date, we had applied for the following trademarks which we believe
are material to our business:

Place of Application Application date


No. Trademark registration Registered owner Class number (mm/dd/yyyy)

1. PRC Company 35 17534255 07/28/2015

2. PRC Company 36 17534330 07/28/2015

3. PRC Company 38 17534212 07/28/2015

4. PRC Company 38 20058778 05/24/2016

5. Hong Kong Company 35 & 304147551 05/22/2017


36

6. Hong Kong Company 35 & 304147579 05/22/2017


36

7. Hong Kong Company 35 & 304147588 05/22/2017


36

8. Hong Kong Company 35 & 304147597 05/22/2017


36

9. Hong Kong Company 35 & 304147605 05/22/2017


36

10. Hong Kong Company 35 & 304147614 05/22/2017


36

11. Hong Kong Company 35 & 304147623 05/22/2017


36

— VI-5 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application Application date


No. Trademark registration Registered owner Class number (mm/dd/yyyy)

12. Hong Kong Company 35 & 304147632 05/22/2017


36

Patents

As of the Latest Practicable Date, we have made the following patent applications in the PRC
and which we consider to be or may be material to our business:

Place of Application date


Patent Patentee registration Application number (mm/dd/yyyy)

Gene sample box Company; PRC 201530310341.4 08/18/2015


(Genbox) Shenzhen Huada
基因採樣拭子容納盒 Genetics Co., Ltd
(知因保GenBox) (深圳華大基因股
份有限公司)

One-time sampling Company; PRC 201530310305.8 08/18/2015


swab (Genbox) Shenzhen Huada
一次性採樣拭子 Genetics Co., Ltd
(知因保GenBox) (深圳華大基因股
份有限公司)

A method and system Company PRC 201610349430.3 05/24/2016


for remote automatic
recognition by smart
gadgets (一種智能設備
屏幕狀態的遠程自動識
別方法和系統)

A method and system Company PRC 201610630185.3 08/30/2016


for identifying browser
uniqueness and risk
characteristics (一種識
別瀏覽器唯一性和風險
特徵的方法和系統)

— VI-6 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Place of Application date


Patent Patentee registration Application number (mm/dd/yyyy)

A method and system Company PRC 201610398963.0 06/07/2016


for determining data
integrity under a
distribution system
(一種判斷分布式系統下
互聯網數據完整性的方
法和系統)

A multi-dimensional Company PRC 201610390832.8 06/03/2016


data query and storage
system and method
(一種多維度數據查詢和
存儲系統和方法)

Automatic processing Company PRC 201610435514.9 06/17/2016


method and system for
graphic calculation of
online insurance
business (基於圖論算法
的互聯網保險領域的業
務報文自動處理方法和
系統)

A method and system Company PRC 201610531622.6 07/07/2016


for testing webshell
(一種webshell的檢測方
法和檢測系統)

A system and method Company PRC 201610545682.3 07/12/2016


for internet stress
testing (一種互聯網系統
的壓力測試系統和方法)

A proxy application for Company PRC 201610670046.3 08/15/2016


a host server (一種用於
具有服務容器的主機系
統的代理應用以及系統

— VI-7 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Copyright

As at the Latest Practicable Date, we have registered the following copyright and which we
consider to be or may be material to our business:

No. Registration no. Registration date Software name Version no. Type of registration

1 2016SR142009 June 14, 2016 ZhongAn V1.0 Computer Software


Insurance Client Copyright
IOS Software (眾 Registration
安保險移動客戶
端IOS版軟件)
2 2016SR117633 May 25, 2016 ZhongAn V1.0 Computer Software
Insurance Client Copyright
Android Software Registration

Domain Name

As at the Latest Practicable Date, we have registered the following domain names and which we
consider to be or may be material to our business:

Expiry date
No. Domain name Registered owner (mm/dd/yy)

1 zhongan.com.cn Company 12/28/2022


2 zhongan.com Company 08/05/2022
3 zhonganzaixian.cc Company 06/28/2022
4 zhonganzaixian.net Company 06/28/2022
5 zhonganzaixian.com Company 06/28/2022
6 zhonganzaixian.com.cn Company 06/28/2022
7 zhonganzaixian.cn Company 06/28/2022
8 zhonganonline.cc Company 06/28/2022
9 zhonganonline.net Company 06/28/2022
10 zhonganonline.com Company 06/28/2022
11 zhonganonline.cn Company 06/28/2022
12 zhonganonline.com.cn Company 06/28/2022
13 眾安.中國 Company 08/22/2024
14 眾安.公司 Company 09/01/2024
15 眾安.網絡 Company 09/01/2024
16 眾安保險.網絡 Company 09/01/2024
17 眾安保險.公司 Company 09/01/2024
18 眾安在綫.公司 Company 09/01/2024
19 huzhu.io ZhongAn Information and Technology Services 08/16/2019
Company Limited

— VI-8 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Expiry date
No. Domain name Registered owner (mm/dd/yy)

20 zhongan.life ZhongAn Information and Technology Services 07/19/2019


Company Limited
21 anlink.io ZhongAn Information and Technology Services 07/19/2019
Company Limited
22 zhongan.io ZhongAn Information and Technology Services 07/19/2019
Company Limited
23 zhongan.in ZhongAn Information and Technology Services 07/19/2019
Company Limited
24 zhongan.asia ZhongAn Information and Technology Services 07/19/2018
Company Limited
25 zhongan360.com ZhongAn Information and Technology Services 07/19/2018
Company Limited
26 anlink.com ZhongAn Information and Technology Services 01/05/2019
Company Limited
27 zhonganinfo.com ZhongAn Information and Technology Services 11/09/2018
Company Limited
28 za-tech.net ZhongAn Information and Technology Services 11/28/2021
Company Limited
29 anlink.tech ZhongAn Information and Technology Services 04/13/2020
Company Limited
30 anlink.xin ZhongAn Information and Technology Services 04/01/2020
Company Limited
31 xdecision.cn ZhongAn Information and Technology Services 06/07/2018
Company Limited
32 zuifuli.io ZhongAn Information and Technology Services 09/14/2019
Company Limited

Save as aforesaid, as of the Latest Practicable Date, there were no other trade or service marks,
patents, intellectual property rights which were material in relation to our Company’s business.

4. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUPERVISORS

A. Particulars of Directors’ and Supervisors’ Contracts

Each of our Directors has entered into a service contract with our Company pursuant to which
they agreed to act as Directors for an initial term of three years. Either party has the right to give
written notice to terminate the agreement. Details of the Company’s remuneration policy is described
in section headed “Directors, Supervisors and Senior Management — Remuneration of Directors,
Supervisors and Senior Management”.

Each of the Supervisors entered into a service contract in respect of, among others, compliance
with relevant laws and regulations, observation of the Articles of Association and provision on
arbitration with the Company.

— VI-9 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Save as disclosed above, none of the Directors or Supervisors has or is proposed to have a service
contract with any member of our Group (other than contracts expiring or determinable by the relevant
employer within one year without the payment of compensation (other than statutory compensation)).

B. Remuneration of Directors and Supervisors

The aggregate amounts of compensation (including fees, salaries, contributions to pension


schemes, housing allowances and other allowances, benefits in kind and discretionary bonuses) which
were paid to the Directors and Supervisors for each of the three years ended 31 December 2016 were
approximately RMB1,679,000, RMB6,844,000 and RMB3,407,000, respectively.

Save as disclosed above, no other payments have been paid or are payable by us to the Directors
and Supervisors in respect of the Track Record Period.

According to the arrangements in force on the Latest Practicable Date, we expect that the total
remuneration to be paid and granted to our Directors and Supervisors for the year 2017 will be
approximately RMB3,305,839.31. The annual salaries of executive Directors, non-executive Directors
and independent non-executive Directors are as follows:

Name Position RMB

Yaping Ou (歐亞平) . . . . . . . . . . . . . Chairman of the Board and Executive nil


Director
Jin Chen (陳勁) . . . . . . . . . . . . . . . . Executive Director and chief executive 2,418,339.31
officer
Xinyi Han (韓歆毅) . . . . . . . . . . . . . Non-executive Director nil
Jimmy Chi Ming Lai (賴智明) . . . . . Non-executive Director nil
Guoping Wang (王國平) . . . . . . . . . . Non-executive Director 62,500
Xiaoming Hu (胡曉明) . . . . . . . . . . . Non-executive Director nil
Fang Zheng (鄭方) . . . . . . . . . . . . . . Non-executive Director 62,500
Hugo Jin Yi Ou (歐晉羿) . . . . . . . . . Non-executive Director 62,500
Shuang Zhang (張爽) . . . . . . . . . . . . Independent non-executive Director 125,000
Hui Chen (陳慧) . . . . . . . . . . . . . . . Independent non-executive Director 125,000
Li Du (杜力) . . . . . . . . . . . . . . . . . . Independent non-executive Director 125,000
Yifan Li . . . . . . . . . . . . . . . . . . . . . . Independent non-executive Director 125,000
Ying Wu (吳鷹) . . . . . . . . . . . . . . . . Independent non-executive Director 125,000
Yuping Wen (溫玉萍) . . . . . . . . . . . . Chairman of Board of Supervisors 25,000
Baoyan Gan (干寶雁) . . . . . . . . . . . Supervisor 25,000
Lei Xiang (向雷) . . . . . . . . . . . . . . . Employee Representative Supervisor 25,000

Each of the Directors is entitled to reimbursement for all reasonable expenses properly incurred
in the performance of his or her duties.

— VI-10 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

5. DISCLOSURE OF INTERESTS

A. Disclosure of Interests

Directors

To the best knowledge of our Directors, the following person(s) will, immediately following the
completion of the Global Offering (assuming the Over-allotment Option is not exercised), have an
interest or short position in the Shares or underlying shares which are required to be disclosed to the
Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV
of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class
of share capital carrying the rights to vote in all circumstances at the general meetings of the
Company:

Approximate
Approximate percentage of
percentage of interest in the total
interest in the share capital of the
relevant class of Company
Shares immediately immediately
following the Global following the Global
Offering assuming Offering assuming
Number of shares held the Over-allotment the Over-allotment
immediately following Option is not Option is not
Shareholder the Global Offering Nature of interest exercised (1) exercised (2)

Yaping Ou (3) . . . 81,000,000 Interest in a controlled 8.10% 5.63%


corporation

Notes:
(1) The calculation is based on the percentage of interest in Domestic Shares of the Company immediately following the
Global Offering.

(2) The calculation is based on the total number of 1,439,918,900 Shares in issue immediately following the Global Offering.
(3) Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限公司) is a subsidiary of Timeway Holdings Limited
(中宇集團有限公司). The entire interest of Timeway Holdings Limited (中宇集團有限公司) is held by Sinolink
Worldwide Holdings Limited (香港百仕達控股有限公司) which is listed on the Hong Kong Stock Exchange (SEHK:
1168), of which Mr.Yaping Ou is interested in more than one third of the voting shares. As such, Timeway Holdings
Limited (中宇集團有限公司), Sinolink Worldwide Holdings Limited (香港百仕達控股有限公司) and Mr. Yaping Ou will
be deemed to be interested in the Shares held by Cnhooray Internet Technology Co. Ltd. (深圳日訊網絡科技股份有限
公司) upon listing.

— VI-11 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

Substantial Shareholders

Save as disclosed in the section headed “Substantial Shareholders” in this prospectus, our
Directors are not aware of any other person who will, immediately following the completion of the
Global Offering have an interest or short position in the Shares or the underlying Shares which are
required to be disclosed to our Company and the Stock Exchange under the provisions of Division 2
and 3 of Part XV of the SFO, or directly or indirectly, be interested in 10% of more of the nominal
value of any class of share capital carrying the rights to vote in all circumstances at the general
meetings of our Company.

B. Disclaimers

Save as disclosed in this prospectus:

(a) none of the Directors, Supervisors or any of the parties listed in “K. Consents” below is
interested in the promotion of the Company, or has any direct or indirect interest in any
assets which have been, within the two years immediately preceding the date of this
prospectus, acquired or disposed of by or leased to, the Company, or are proposed to be
acquired or disposed of by or leased to the Company;

(b) none of the Directors or Supervisors is materially interested in any contract or arrangement
subsisting at the date of this prospectus which is significant in relation to our business taken
as a whole;

(c) save in connection with the Hong Kong Underwriting Agreement and the International
Underwriting Agreement, none of the parties in the aforesaid paragraph:

(i) is interested legally or beneficially in any of our Shares or any shares in any of our
subsidiary; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate
persons to subscribe for our securities;

(d) none of the Directors or Supervisors is a director or employee of a company which is


expected to have an interest in the Shares falling to be disclosed to the Company and the
Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the
SFO once the H Shares are listed on the Hong Kong Stock Exchange;

(e) as at the Latest Practicable Date, none of the Directors, Supervisors, their respective
associates, or any of the Shareholders (who to the knowledge of the Directors owns more
than 5% of our issued share capital), had any interest in any of our top five suppliers and
top five clients in respect of each of our business segments;

(f) none of the Directors, Supervisors and chief executives of the Company has for the purpose
of Divisions 7 and 8 of Part XV of the SFO or the Listing Rules, nor is any of them taken
to or deemed to have under Divisions 7 and 8 of Part XV of the SFO, any interests and short

— VI-12 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

positions in the shares, underlying shares and debentures of the Company or any associated
corporations (within the meaning of the SFO) or any interests which will have to be entered
in the register to be kept by the Company pursuant to section 352 of the SFO or which will
be required to be notified to the Company and the Hong Kong Stock Exchange pursuant to
the Model Code for Securities Transactions by Directors of Listed Companies once the H
Shares are listed on the Hong Kong Stock Exchange;

(g) no amount, securities or benefit has been paid, allotted or given within the two years
preceding the date of this prospectus to the promoter nor is any such amount, securities or
benefit intended to be paid, allotted or give. None of the Directors is interested in any
business which competes or is likely to compete, either directly or indirectly, with our
business; and

(h) none of the Directors or Supervisors has been paid in cash or shares or otherwise by any
person in respect of the Track Record Period as an inducement to join or upon joining the
Company, or otherwise for services rendered by him in connection with the promotion or
formation of the Company.

7. OTHER INFORMATION

A. Estate Duty

Our Directors have been advised that no material liability for estate duty is likely to fall upon
any member of our Group.

B. Litigation

Save as disclosed in the section headed “Business — Legal and Regulatory Proceedings and
Compliance” in this prospectus, as at the Latest Practicable Date, we are not involved in any material
litigation, arbitration or administrative proceedings. So far as the Directors are aware, no such
material litigation, arbitration or administrative proceedings are pending or threatened against any
member of our Group.

C. Joint Sponsors

Each of the Joint Sponsors, namely, J.P. Morgan Securities (Far East) Limited, Credit Suisse
(Hong Kong) Limited, UBS Securities Hong Kong Limited, CMB International Capital Limited has
respectively declared its independence pursuant to Rule 3A.07 of the Listing Rules.

The Joint Sponsors have made an application on our behalf to the Listing Committee of the Hong
Kong Stock Exchange for listing of, and permission to deal in, our H Shares. All necessary
arrangements have been made enabling the H Shares to be admitted into CCASS.

The Joint Sponsors’ fees in connection with the Listing payable by our Company are estimated
to amount to US$1 million subject to the terms of the engagement.

— VI-13 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

D. Compliance adviser

We have appointed Somerley Capital Limited as our compliance adviser, or the Compliance
Adviser, upon Listing in compliance with Rule 3A.19 of the Listing Rules.

E. Preliminary expenses

We have not incurred any material preliminary expenses.

F. Qualification of experts

The qualifications of the experts, as defined under the Hong Kong Listing Rules, who have given
opinions in this prospectus are as follows:

Name Qualification

J.P. Morgan Securities (Far East) Licensed corporation under the SFO for type 1 (dealing in
Limited. . . . . . . . . . . . . . . . . . . . securities), type 4 (advising on securities) and type 6
(advising on corporate finance) of the regulated activities as
defined under the SFO

Credit Suisse (Hong Kong) Licensed corporation under the SFO for type 1 (dealing in
Limited. . . . . . . . . . . . . . . . . . . . securities), type 2 (dealing in futures contracts), type 4
(advising on securities), type 5 (advising on futures
contracts), type 6 (advising on corporate finance) and type 9
(asset management) of the regulated activities as defined
under the SFO

UBS Securities Hong Kong Licensed corporation under the SFO for type 1 (dealing in
Limited . . . . . . . . . . . . . . . . . . . securities), type 2 (dealing in futures contracts), type 6
(advising on corporate finance) and type 7 (providing
automated trading services) of the regulated activities as
defined under the SFO

CMB International Capital Limited Licensed corporation under the SFO for type 1 (dealing in
securities) and type 6 (advising on corporate finance) of the
regulated activities as defined under the SFO

PricewaterhouseCoopers . . . . . . . . Certified Public Accountants, Hong Kong

Oliver Wyman . . . . . . . . . . . . . . . . Industry Consultant

Grandall Law Firm (Shanghai) . . . . Qualified PRC Lawyers

— VI-14 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

G. Taxation of holders of H Shares

The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty if such sale,
purchase and transfer are effected on the H Share register of members of the Company, including in
circumstances where such transaction is effected on the Hong Kong Stock Exchange. The current rate
of Hong Kong stamp duty for such sale, purchase and transfer is HK$2.00 for every HK$1,000 (or part
thereof) of the consideration or, if higher, the fair value of the H Shares being sold or transferred. For
further information in relation to taxation, see “Appendix III — Taxation and Foreign Exchange”.

H. No material adverse change

Save as disclosed in this prospectus, our Directors confirm that there has been no material
adverse change in our financial or trading position since March 31, 2017 (being the date on which the
latest audited consolidated financial statements of the Group were made up) up to the date of this
prospectus.

I. Binding effect

This prospectus shall have the effect, if an application is made in pursuant hereof, of rendering
all persons concerned bound by all the provisions (other than the penal provisions) of Sections 44A
and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.

J. Miscellaneous

Save as disclosed in this prospectus:

(a) within the two years immediately preceding the date of this prospectus, we have not issued
or agreed to issue any share or loan capital fully or partly paid either for cash or for a
consideration other than cash;

(b) no share or loan capital of our Group, if any, is under option or is agreed conditionally or
unconditionally to be put under option;

(c) no member of our Group has issued or agreed to issue any founder or management or
deferred shares;

(d) no member of our Group has issued or agreed to issue any debentures;

(e) the Company has no outstanding convertible debt securities or debentures;

(f) within the two years immediately preceding the date of this prospectus, no commission,
discount, brokerage or other special term has been granted in connection with the issue or
sale of any of the shares or loan capital of the Company or any of our subsidiaries;

(g) there is no arrangement under which future dividends are waived or agreed to be waived;

— VI-15 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

(h) there has been no interruption in our business which may have or have had a significant
effect on the financial position in the last 12 months;

(i) no part of the equity or debt securities of the Company, if any, is currently listed on or dealt
in on any stock exchange or trading system, and no such listing or permission to list on any
stock exchange other than the Hong Kong Stock Exchange is currently being or agreed to
be sought; and

(j) we currently do not intend to apply for the status of a Sino-foreign investment joint stock
limited company and do not expect to be subject to the PRC Sino-Foreign Joint Venture
Law.

(k) no founders or management or deferred shares of the Company or any of its subsidiaries
have been issued or agreed to be issued.

K. Consents

Each of the experts as referred to in the paragraph headed “Qualification of experts” of this
Appendix has given and has not withdrawn its respective written consent to the issue of this
prospectus with the inclusion of any of its certificates, letters, opinions or reports and the references
to its name included herein in the form and context in which it is included.

Save as disclosed in this prospectus, none of the experts named above has any shareholding
interests in any member of our Group or the right (whether legally enforceable or not) to subscribe
for or to nominate persons to subscribe for securities of any member of our Group.

L. Prom oters

The Promoters of the Company are Ant Financial (浙江螞蟻小微金融服務集團股份有限公司),


Tencent Computer System (深圳市騰訊計算機系統有限公司), Ping An Insurance (中國平安保險 (集
團) 股份有限公司), Shenzhen Jia De Xin Investment Company Limited (深圳市加德信投資有限公司),
Unifront Holding Limited (優孚控股有限公司), Cnhooray Internet Technology Co. Ltd. (深圳日訊網
絡科技股份有限公司), Shanghai Yuanqiang Investment Company Limited (上海遠強投資有限公司),
Beijing Ctrip International Travel Agency Limited (北京攜程國際旅行社有限公司) and Shenzhen
Rixun Internet Company Limited (深圳市日訊互聯網有限公司). Save as disclosed in this prospectus,
within the two years immediately preceding the date of this prospectus, no cash, security or benefit
has been paid, allotted or given or is proposed to be paid, allotted or given to the Promoters named
above in connection with the Global Offering or the related transactions described in this prospectus.

M. Personal guarantees

The Directors and Supervisors have not provided personal guarantees in favour of lenders in
connection with banking facilities granted to us.

— VI-16 —
APPENDIX VI STATUTORY AND GENERAL INFORMATION

N. Bilingual document

The English language and Chinese language versions of this prospectus are being published
separately, in reliance upon the exemption provided by Section 4 of the Companies Ordinance
(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L
of the Laws of Hong Kong).

This prospectus is written in the English language and contains a Chinese translation for
information purposes only. Should there be any discrepancy between the English language of this
prospectus and the Chinese translation, the English language version of this prospectus shall prevail.

— VI-17 —
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR
OF COMPANIES IN HONG KONG AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

The documents attached to the copy of this prospectus delivered to the Registrar of Companies
in Hong Kong for registration were:

(a) a copy of each of the WHITE, YELLOW and GREEN Application Forms;

(b) a copy of each of the material contracts referred to in “Appendix VI — Statutory and
General Information — Further Information About Our Business — Summary of Our
Material Contracts”; and

(c) the written consents referred to in “Appendix VI — Statutory and General Information —
Other Information — Qualifications of Experts”.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Skadden,
Arps, Slate, Meagher & Flom at 42/F Edinburgh Tower, The Landmark, 15 Queen’s Road Central,
Hong Kong, during normal business hours up to and including the date which is 14 days from the date
of this prospectus:

(a) the Articles of Association of the Company;

(b) the Accountant’s Report and the report on the unaudited pro forma financial information
prepared by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the texts
of which are set out in “Appendix I — Accountant’s Report” and “Appendix II — Unaudited
Pro Forma Financial Information”, respectively;

(c) the audited financial statements of the companies comprising the Group for the three years
ended December 31, 2016 and the three months ended March 31, 2017;

(d) the industry report issued by Oliver Wyman, the summary of which is set forth in the
section headed “Industry Overview” in this document;

(e) the PRC legal opinions issued by Grandall Law Firm (Shanghai), the Company’s PRC legal
advisers, dated the date of this prospectus in respect of the general matters and property
interests of our Group;

(f) the PRC Company Law, the Special Regulations and the Mandatory Provisions, together
with the unofficial English translations thereof;

(g) the letters of appointment referred to in “Appendix VI — Statutory and General Information
— Further Information About Our Directors and Supervisors — Particulars of Directors’
and Supervisors Contracts”;

— VII-1 —
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR
OF COMPANIES IN HONG KONG AND AVAILABLE FOR INSPECTION

(h) the material contracts referred to in “Appendix VI — Statutory and General Information —
Further Information About Our Business — Summary of Our Material Contracts”; and

(i) the written consents referred to in “Appendix VI — Statutory and General Information —
Other Information — Qualifications and Consents of Experts”.

— VII-2 —

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